The government prefers to sit on the fence regarding the present global debate on the undervalued yuan. According to sources, while India agrees that global fiscal imbalances need to be addressed, it believes that the Chinese currency is only one factor in a more complicated issue. “There are other things, structural issues in the economies of the US and China, that need to be looked at,” said sources.
A sharp currency revaluation could even be a negative to the world currency scenario.
“Anything drastic,” said a source, “could endanger recovery in the West and growth in the emerging economies.” India believes such an action has to been seen in the context of its impact on the world economy.
New Delhi’s view is that currency issues need to be placed in a larger economic context.
“We prefer that multiple problems be fixed in a cooperative approach,” said a source.
While Ithe domestic manufacturing sector is being hurt by Chinese imports, consumers benefit from cheaper products. However, India is waging a more direct battle with China over Beijing’s trade barriers to Indian service and goods exports.
It is unclear if Prime Minister Manmohan Singh will discuss these issues when he meets Chinese leader Wen Jiaobao at the East Asia summit in Hanoi.