No choice but to build reserves despite US monitoring list : RBI Governor

Emerging markets economies (EME) such as India will have to continue to build reserves to mitigate spillovers of loose monitoring policies pursued by developed nation, even at the risk of being labelled currency manipulator by the US government, Reserve Bank of India (RBI) governor Shaktikanta Das on Saturday said.

“Under uncertain global economic environment, EMEs typically remain at the receiving end. In order to mitigate global spillovers, they have no recourse but to build their own forex reserve buffers, even though at the cost of being included in currency manipulators list or monitoring list of the US Treasury,” governor Das said while delivering the annual Nani Palkhivala lecture.

India’s foreign exchange reserves have crossed $580 billion. The US Treasury in December included India in the currency manipulator watchlist with nine others for one-sided intervention preventing rupee appreciation. A fast accumulation of reserves, about $100 billion in a year, was cited by the US Treasury. The RBI governor though, made it abundantly clear that India will not be bothered by such cautions, as it is pursuing its policies to preserve its own financial stability from wild swings in capital flows.

“I feel that this aspect needs greater understanding on both sides so that EMEs can actively use policy tools to overcome the capital flow related challenges,” Das said, adding, RBI is closely monitoring both global headwinds and tailwinds while assessing domestic macroeconomic situation and its resilience.

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