The Trump administration on Tuesday removed India from its currency monitoring list of major trading partners

The Trump administration on Tuesday removed India from its currency monitoring list of major trading partners, citing certain developments and steps being taken by New Delhi which address some of its major concerns.

Switzerland is the other nation that has been removed by the US from its currency monitoring list which among others include China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia and Vietnam.

India has been removed from the monitoring list in this report, having met only one out of three criteria a significant bilateral surplus with the US for two consecutive reports, the Treasury Department said in its latest semi-annual report on macroeconomic and foreign exchange policies of major trading partners of the US sent to the Congress.

After purchasing foreign exchange on net in 2017, the central bank steadily sold reserves for most of 2018, with net sales of foreign exchange reaching 1.7 per cent of GDP over the year, it said.

India maintains ample reserves according to the IMF metrics for reserve adequacy, it said.

In both Switzerland and India, there was a notable decline in 2018 in the scale and frequency of foreign exchange purchases, the report said.

Neither Switzerland nor India met the criteria for having engaged in persistent, one-sided intervention in either the October 2018 report or this report. Both Switzerland and India have been removed from the monitoring list, the Treasury said in its report running into over 40 pages.

India for the first time was placed by the US in its currency monitoring list of countries with potentially questionable foreign exchange policies in May 2018 along with five other countries - China, Germany, Japan, South Korea and Switzerland.

In its next report in October 2018, the Treasury had said that India has made improvements and its name would be removed from the currency manipulation list in the next report.

"India's circumstances have shifted markedly, as the central bank's net sales of foreign exchange over the first six months of 2018 led net purchases over the four quarters through June 2018 to fall to USD 4 billion, or 0.2 per cent of the GDP," the Treasury had said in its October 2018 report.

1. What Is The Currency Monitoring Watchlist?

The United State's currency monitoring watchlist includes countries which have a 'questionable' foreign exchange policies and practice currency manipulation.

Changes in currency policy has been used by the Trump administration to keep a watch on countries that have affected American Business and customers.

For India, this comes amid the ongoing trade spat between Washington and New Delhi.

Trump has repeatedly claimed that India imposes “tremendously high” tariffs on American products, while also dismissing as “inadequate” the Indian government’s decision to halve the import tariff on Harley-Davidson motorcycles from 100% to 50% last year, even as he has maintained that his administration is “fixing broken trade deals” to protect American workers.

While being on the list does not involve any penalties,however it hampers the country's confidence in the global financial markets.

2. Which Are The Countries That Has Been Included/Removed In The Currency Monitoring List

India, China, Japan,Germany, Switzerland,North Korea were involved in the the bi-annual currency watchlist in October last year.

While India and Switzerland have not been mentioned in the latest list, the US has added Ireland, Italy, Malaysia, Singapore and Vietnam to the list, with China continuing to figure in it.

Bi-Annual Currency Watchlist (Last Year): India, China, Japan,Germany, Switzerland,North Korea
Bi-Annual currency Watchlist (Current Year): Ireland, Italy, Malaysia, Singapore, Vietnam, China, Japan, Germany and North Korea

3. Criteria?

Countries with a current-account surplus equivalent to 2 per cent of gross-domestic product are eligible for the list, according to modifications made in the new list, down from 3 per cent earlier. Other factors include repeated intervention in the currency markets and a trade surplus with the US of at least $20 billion.

4. Why Does China Continue To Be On The List?

China continues to feature in the list but the US has not labelled China and other countries as currency manipulators. This comes at a time when China and US are involved in trade war.

Beijing, however, has raised tariffs on imports of U.S. rare earth metal ores from 10% to 25% from June 1, making it less economical to process the material in China while in the same time Chinese President's Xi Ping's visit to a rare earth plant last week is seen as a move to leverage a dominant position in the US-China trade war.