KARACHI, May 18: Any revaluation of the Chinese yuan will have less of an impact on India than other Asian countries, Reserve Bank of India Governor Yaga Venugopal Reddy told Reuters on Wednesday. A yuan revaluation is expected to spark a rally in Asian currencies and speculation about China’s plans to reform its tightly controlled currency regime has taken the Indian rupee on something of a roller-coaster ride in recent days.

Asked what ramifications there might be for India from any move by Beijing to revalue its currency, the Indian central bank chief saw little reason for any alarm. “In the capital account, how exactly it will work out is a matter of conjecture. But there is every reason to believe that the economic fundamentals of India are fairly strong,” Mr Reddy said in an interview during a visit to Karachi.

“And given the overall positioning of India in the international capital flows, it will be reasonable to conclude that the impact of any yuan revaluation on India will be far, far less compared to most other Asian countries.”

China is Asia’s second-largest economy while neighbouring India is the region’s fourth-largest. Bilateral trade totalled more than $13 billion in the year ending March 2004, nearly three times India’s trade with Japan.

But Mr Reddy said that while bilateral trade with China was growing it was still a small portion of India’s total external trade, and although there were not many areas where the two economies were competing, a yuan revaluation could bring some marginally positive effect on India’s trade account. Nor did the Indian central bank chief see much impact on invisible trade flows from a revalued yuan.—Reuters