The U.S. Treasury Department had recently retained India in a watchlist for currency manipulators submitted to the U.S. Congress, citing higher dollar purchases (close to 5% of the gross domestic product) by the Reserve Bank of India (RBI).
Another trigger for the inclusion in the currency watchlist is a trade surplus of $ 20 billion or more. India's trade surplus with the U.S. grew by about $5 billion to $23 billion in 2020-21 from around $18 billion in the previous fiscal year.
Central banks buy and sell foreign currency to provide stability in the currency, India's overall reserves have been fairly steady at $500 bn to $600 bn. India is not accumulating reserves like China, which at one point had reserves of $4 trillion,
India had a steady holding pattern of forex reserves "with ups and downs" based on market-based transactions that central banks may undertake.
The US Treasury department defines currency manipulation as when countries deliberately influence the exchange rate between their currency and the US dollar to gain unfair competitive advantage in international trade.