April 1, 2011 / 12:18 PM / 8 years ago

India cbank report: weak Chinese yuan disadvantages India

* India’s imports from China growing faster than its exports

* 1 pct fall in rupee vs yuan may cut India imports from China by 0.43 pct

By Suvashree Dey Choudhury and Archana Narayanan

MUMBAI, April 1 (Reuters) - A weak Chinese currency erodes the competitiveness of trading partners including India, whose imports from China are growing faster than its exports, a staff study by the Indian central bank said on Friday.

“By keeping RMB (renminbi) undervalued against the USD and depreciating it in line with the USD in the international market without taking into account the economic fundamentals of China, it invariably and distinctly provides competitive advantage over its trade competitors and trade partners including India,” the Reserve Bank of India (RBI) staff study said.

The United States has long called on Beijing to let its currency rise more quickly, accusing it of keeping its exchange rate artificially cheap to give its exporters an unfair advantage.

India’s central bank chief has said that an artificially low yuan hurts India, although Indian officials have generally refrained from criticising Beijing’s currency policy.

The report by the RBI’s research department, which does not necessarily reflect the view of the central bank’s management, warned against a growing reliance on Chinese imports, which rose to 10.7 percent of all Indian imports in 2009/10 from 7.3 percent five years earlier.

“Given the fact that the policies of China are export-oriented, pro-FDI (foreign direct investment) and keeping the exchange rate undervalued etc., the emerging market economies which have allowed their currencies to float will have to face distinct issues in their management of balance of payments,” the RBI paper said.

India’s rupee is partially convertible.

Its merchandise trade deficit was $31.6 billion in the October-December quarter, up from $30.9 billion a year earlier. [ID:nL3E7F10E7]

The study estimated that a one percent depreciation of the rupee against the yuan was likely to reduce India’s imports from China by around 0.43 percent. (Editing by Tony Munroe)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below