New Delhi: World economies, including India, will have to take note of Chinese currency devaluation designed to avert slowdown in its economy and exports, Chief Economic Advisor Arvind Subramanian said Wednesday.
"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," he told reporters here.
Subramanian, however, refused to comment on the impact of yuan devaluation on India and its exports.
China's central bank yesterday devalued its tightly controlled currency by close to 2 percent to boost exports, amid a slowdown in the world's second-largest economy and the recent stock market crash.
Even global exports are on a sliding path. This decline in global demand is putting pressure on the export-driven Chinese economy.
The world's largest exporter, China's exports account for 13.7 percent of the global pie. India's overall exports have contracted for seven straight months until June 2015.
Subramanian said China, on the one hand, has devalued the currency and taken measures aimed at reducing the spread between onshore and offshore rates.
"This action is both an endeavour to make their yuan a more plausible credible candidate for inclusion in the SDR basket," he said.
Special Drawing Rights (SDR) is an international reserve asset created by the International Monetary Fund (IMF) to supplement its member countries' official reserves.
Talking about credit growth in the economy, Subramanian said when the wholesale price index is in negative for eight months, one should not look at nominal credit growth.
"... Real credit growth has started increasing after declining for several quarters and within that, there is a sharp divergence between real credit growth to the personal sector, which is doing surprisingly well, while it's credit growth to industry that remains relatively weak," he said.
The Chief Economic Advisor said the growth in underlying indirect tax collections (excluding the additional revenue measures) of 14.6 percent for the first four months of fiscal suggests a "healthy increase in nominal GDP growth".
Subramanian said the indirect tax collections between April-July reflect in part additional measures taken, including the excise increases in diesel and petrol, the increase in clean energy cess, the withdrawal of exemptions for motor vehicles and consumer durables, and in June 2015, the increase in service tax from 12.36 to 14 percent.
"Stripped of all additional revenue measures, indirect tax collections increased by 15.2 percent in July 2015 over July 2014, and by 14.6 percent for April-July 2015 compared to the April-July 2014," he added.
For July 2015, indirect tax collections increased by 39.1 percent on year-on-year basis. Cumulatively for April-July 2015, the indirect tax collections increased by 37.6 percent over the same period last year.
