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RBI activity in forex market balanced, not accumulating reserves, says secretary

RBI activity in forex market balanced, not accumulating reserves, says secretary

India on Tuesday rejected grounds used by the US treasury department for putting the country on the currency manipulator watchlist, saying the central bank’s activities in foreign exchange market were perfectly balanced and it was not accumulating forex reserves.

For the second time since the start of the pandemic, India on Monday figured on the US treasury department’s watchlist of currency manipulators. The central bank’s dollar purchase at 5 per cent of the GDP exceeding the 2 per cent threshold was cited as the reason.

Commerce Secretary Anup Wadhawan said that these watchlists are recent phenomena and it is an intrusion into the policy space of central banks, which “I personally do not understand it’s rational or economic logic”.

He said that India’s overall forex reserves have been fairly steady, below USD 500-600 billion, and the country is not accumulating reserves like China.

“These are, in my view, very legitimate market based operations of a central bank. It is a mandate of the central bank to provide stability in the currency, as a result of which the central bank buys and sells foreign currency . Our overall forex reserves have been fairly steady.

“We are not accumulating reserves, which are steadily growing. We have a steady pattern of reserves holding…So I think the central bank’s activity in the foreign exchange market has been perfectly balanced and completely legitimate,” he told reporters.

When asked about the proposal of India and South Africa at the World Trade Organisation (WTO) about temporary waiver of certain provisions related to an agreement on intellectual property rights to deal with Covid-19 pandemic, Wadhawan said that proposal has received “widespread” support from different members, while some nations have opposed that.

“The proposal has met with tremendous success and more importantly highlighted the importance of the issue,” he said.

On a question whether the government is planning to waive 10 per cent customs duty on Covid vaccines, the secretary said that departments of revenue and pharmaceuticals would take a joint decision on that, but “I do not have any information on that”.

On oxygen supply in the country, he said although the issues are being coordinated by the Department for Promotion of Industry and Internal Trade (DPIIT), on war footing and efforts are underway to make supplies available. This is being coordinated on 24×7 basis and the supply position has improved tremendously.

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