The Ministry of Finance on Monday referred to the depreciation of the rupee in a response to Lok Sabha. He acknowledged that the Indian rupee fell to historic lows against the US dollar in June. “Global factors such as the Russian-Ukrainian conflict, soaring crude oil prices and tighter global financial conditions are the main reasons for the weakening of the Indian rupee against the US dollar,” he said. declared.
The ministry added that currencies such as the British pound, Japanese yen and euro weakened more than the Indian rupee. He added that the Indian rupee strengthened against these currencies in 2022.
When asked if the Indian rupee “reached the equal of Bhutan’s currency” on June 29 and 30, the ministry added that the Bhutanese ngultrum had been at par with the Indian rupee since its introduction in 1974 and that it was moving in tandem with the rupee.
Currency depreciation is likely to improve export competitiveness, which has a positive impact on the economy, the ministry added. “Depreciation also impacts imports by making them more expensive. The Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of excessive volatility. The Reserve Bank of India has raised interest rates in recent months, making it more attractive to hold Indian rupees for residents and non-residents alike,” he added.
The ministry, responding to a question on the measures taken by the RBI, said the apex bank’s measures include exempting additional foreign currency deposits from non-residents (banks) and non-residents (external) in rupee the maintenance of the CRR and SLR until November 4, 2022, revision of the regulatory regime relating to foreign portfolio investments in debt inflows, raising the limit on external commercial borrowings (under automatic route) to 1.5 billion dollars and more.
Responding to a question on whether the depreciation of the rupee has caused a huge flow of money from abroad to India, the ministry said: “The outflow of foreign portfolio capital is a major reason for the depreciation of the Indian rupee. Monetary tightening in advanced economies, particularly in the United States of America, tends to induce foreign investors to withdraw their funds from emerging markets. Foreign portfolio investors have so far withdrawn about $14 billion from Indian equity markets in the 2022-23 financial year.
Also read: “The dollar remains the safe currency”: Mahindra, Goenka, Chidambaram on the fall of the rupee