China’s Currency War To Have 3-Fold Impact On India: India Inc

12 August, New Delhi

A sharp depreciation of Yuan by China’s Central Bank is the portent full-fledged currency war between competing economies of the world, having implications for India, industry has said. ”

Ironically, this war would catch Emerging Economies like India in the middle,” ASSOCHAM said. The sharp currency depreciation , the steepest by over two decades, will have a three-fold impact for India, it said.

For one, there is going to be a lot more volatility around the rate of rupee , as is seen today with the Indian currency touching its lowest since September, 2013 forcing intervention by the Reserve Bank.

Secondly, Indian exports which are already under a huge pressure in major markets of the world, would see further erosion in their competitiveness as the Chinese would become much more aggressive in their desperate moves to shore up their economy.

Thirdly, if the Indian rupee is not able to keep pace with Yuan in losing value, China will further dump goods into the Indian market , making the trade deficit further widen.

“Both the RBI and the Finance Ministry should keep a very close watch and take immediate and swift actions to ensure that Indian economy does not suffer the collateral damage of the currency war among the major economies. Chances are that the US may react in a manner which may further queer the pitch”, ASSOCHAM Secretary General Mr D S Rawat said.

He said in a single shot, China has increased the external risks for India and other EMs.