Why Panagariya is worried over yuan devaluation

India would be very concerned if China were to allow a major devaluation in the yuan currency, its Group of 20 summit negotiator told Reuters, adding that he doubted Beijing would allow this to happen, said Arvind Panagariya (below, left), Vice Chairman of NITI Aayog of India.

Panagariya, who also heads the government's main economic advisory body, added that the strength of the Indian rupee against many currencies had contributed to the weak export performance of Asia's third-largest economy.

"India has to be certainly very concerned if a massive or very large devaluation of the yuan happens," he said in an interview after returning from a visit to China to discuss preparations for this year's G20 summit.

"In the end, that not only makes Indian goods less competitive in the Chinese market but also India's ability to compete with the Chinese in third markets is impacted."

Panagariya, appointed by Prime Minister Narendra Modi a year ago to run Niti Aayog, said he doubted China would allow the yuan to crash: "The Chinese are not going to let the yuan devalue excessively."

Commenting on the rupee, he said the Indian currency had appreciated substantially against most currencies apart from the dollar.

That was a "concern", he said, because Indian exports have declined over the past year even as global trade has grown slightly.

"While one can say that some of the decline is due to the global economy itself, in terms of export markets barely growing, I think some of the burden also falls on the appreciation of the rupee," said Panagariya.

Figures this week showed that India's merchandise exports fell in December for the 13th month in a row -- and were down by nearly 15 percent from a year earlier.

The top image is used for representational purpose only. Photograph: Reuters