New Delhi: With rupee breaching the psychological mark of 80 against the US dollar and weakening as much as 7 per cent this year, the government on Tuesday attributed the slide in currency to global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions.
"Currencies such as the British pound, the Japanese yen and the Euro have weakened more than the Indian rupee against the US dollar and therefore, the Indian rupee has strengthened against these currencies in 2022," said Pankaj Chaudhary, Minister of State (MoS) for Finance in Rajya Sabha in written reply to a question.
The Minister said that the Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of excess volatility.
Accordingly, the central bank has raised interest rates in recent months thus increasing the attractiveness of holding Indian rupees for residents and non-residents.
Chaudhary listed out various steps taken by the RBI to contain the fall in Indian rupee. They include revision of regulatory regime relating to Foreign Portfolio Investment in debt flows to encourage foreign investment in Indian debt instruments and raising of External Commercial Borrowing limit (under automatic route) to $1.5 billion.
But despite a slew of measures taken by the RBI, the rupee continues to depreciate against the greenback.
The rupee reached its record low on Tuesday falling to 80.06 against dollar in the early trade.
The sliding rupee has emerged as a major concern for policy-makers as it makes the imports expensive thus fuelling inflation. India being one of the largest oil importers in the world, weakening of rupee means payment for fuel bill going up.
A Finance Ministry report recently said that widening of current account deficit (CAD) has depreciated the Indian rupee against the US dollar by 6 per cent since January of 2022.
“Rupee has performed well in 2022 compared to other major economies unlike in 2013, where it depreciated against other major economies, thus, reflecting strong fundamentals of the Indian economy. The depreciation, in addition to elevated global commodity prices, has also made price-inelastic imports costlier, thereby making it further difficult to reduce the CAD. To meet the financing needs of a widening CAD and rising FPI outflows, forex reserves, in the six months since January 2022, have declined by USD 34 billion," the report said. (UNI)