India rejected the premise of the US Department of Finance putting it on the watch list of those who manipulated currency behavior. Commerce Secretary Anoop Wadhawan said that the activities of the central bank in the foreign exchange market are balanced and it is not collecting foreign exchange reserves.
The US has put India on this watchlist for the second time since the onset of the epidemic. The reason for the purchase of dollars by the central bank is more than five percent of GDP. The US Department of Finance has said that this limit should be two percent.
Wadhawan said that such monitoring lists have started to be made recently. It is an intervention in the policy area of the central bank. Personally, I do not understand the economic logic behind this. India’s total foreign exchange reserves are stagnant between 500 and 600 billion dollars. India is not collecting foreign currency like China.
Wadhawan said that the country’s central bank has fully legitimate operations. The main function of the central bank is to provide stability to the currency. This is why the central bank buys and sells foreign currency. Our total foreign exchange reserves are fairly stable.
Although, The value of foreign portfolio investors’ (FPI) holdings in domestic shares reached a record high of $ 555 billion in FY 2020-21. It has increased by $ 105 billion from September 2020 to March 2021 alone. A report has revealed this information. According to data from Bank of America (BofA) Securities, domestic institutional investors (DII) had an investment of $ 203 billion, which is less than half of the FPI.
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