World economies must take note of yuan devaluation: CEA Arvind Subramanian

NEW DELHI: The world will have to take note of the yuan devaluation, Chief Economic Adviser (CEA) Arvind Subramanian said, hours after the Chinese central bank pushed its currency lower for the second day in a row. "There is no doubt that China is responding to its own internal development of slowing down of growth and exports in order to give its economy a boost. All of us policymakers around the world, including India, have to take notice of this action," Subramanian told reporters.

He refused to speculate on the impact of yuan devaluation on India and its exports, but the government has already proposed a 2.5 per cent rise in import duty on some base metals. China’s central bank on Tuesday devalued its currency by close to 2 per cent to boost exports and support its rapidly slowing economy. The yuan fell another 2 per cent on Wednesday. Most regional currencies, including the rupee, have fallen against the dollar after the yuan devaluation and concerns have risen over greater competition from Chinese exports in the international markets and also the possibility of dumping of cheaper Chinese goods. The CEA said the devaluation could have also been targeted at getting the yuan included in the IMF’s reserves currency special drawing rights (SDR). "This action is both an endeavour to make their yuan a more plausible and credible candidate for inclusion in the SDR basket," he said. SDR is an international reserve asset created by the IMF in 1969 to supplement membercountries’ official reserves. Meanwhile, the government has raised basic customs duty on base metals such as iron, steel, copper, nickel and aluminium.