Washington: Finance minister Pranab Mukherjee has welcomed the Chinese decision to make its currency yuan more flexible, but said its impact on Indian economy would not be much.
“This is a good initiative and we welcome it,” Mukherjee said in an interview here.
China ended its 23-month peg against the US dollar, which saw the Chinese currency rising more than 0.4% against the dollar yesterday, the biggest rise since 2005.
Replying to what could be the impact of a more flexible yuan on the Indian economy, he said, “Not much. It will not have very huge impact on Indian economy.”
However, industry experts say appreciation of yuan will help Indian exporters compete better with their Chinese counterparts in the global market, especially in areas like textiles, leather and handicrafts.
For the world economy, Mukherjee said China’s decision will help and that he is hopeful that China will follow the policy keeping in view the interest of the world economy.
“Overall for world economy, it would have impact as the flexibility is being reflected by addressing the value of the currency as per the market rate,” he added.
Yuan’s appreciation against the dollar will increase the purchasing power of the Chinese, although it would make imports from China costlier for the West. Besides, increased consumption in China would help the US and European exports.
The White House has said that it would be monitoring the progress on the Chinese assurance that it would be making its currency more flexible.
The yuan issue is likely to be one of the topics of discussions during upcoming G-20 Summit in Toronto.