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)

India cbank report: weak Chinese yuan disadvantages India