An artificially undervalued currency gives China a distinct advantage in the export market.
China's policy to keep its currency artificially undervalued gives it a huge economic advantage and impacts India's trade.
In the paper, 'The Implications of Renminbi Revaluation on India's Trade', S Arunachalaramanan and Ramesh Golait of the Reserve Bank of India (RBI) have said that an artificially undervalued currency gives China a distinct advantage in the export market.
"By keeping renminbi (RMB) undervalued against the US dollar (USD) and depreciating it in line with the USD in the international market without taking into account the economic fundamentals of China, it invariably and distinctly provides competitive advantage over its trade competitors and trade partners including India," the paper said.
It added that any revaluation of the RMB, also known as Yuan, will have an impact on India's trade, particularly its imports