There is no collapse in the Rupee and the Reserve Bank of India is only intervening in the forex markets to rein in volatility, Finance Minister Nirmala Sitharaman assured Parliament on August 2, 2022.
The Minister also emphasised that India, unlike many other countries, is not fixated on pegging the currency at a particular level, and said the government is working with the central bank to bolster foreign currency inflows.
“Indian Rupee’s fluctuations are more versus the US dollar and even there, its performance is much better than its own peers. We have withstood the impact of the US Fed’s decisions much better than any other peer currencies, and the Rupee is appreciating in value compared to other currencies. Let us understand the context and I assure you there is no collapse,” Ms. Sitharaman said, during during the Question Hour in Rajya Sabha.
While India’s foreign exchange reserves had come down to $571.5 billion on July 2022 from about $600 billion recently, the minister pointed out this is ‘not a small amount’ and the country is still ‘comfortably placed’.
The Rupee, she noted, ‘is actually finding its natural course’ and the Reserve Bank of India (is continuously monitoring it and intervening only if there is volatility. “The RBI’s intention is not so much to fix the value of the Rupee,” she noted.
“I want the House to take cognizance of Indian rupee’s performance versus others such as the U.K. Pound and contextualise its performance versus the U.S. dollar particularly because of the various steps being taken by the US Fed,” she said.
Minister of State for Finance Pankaj Chaudhary said that the Rupee had fallen by 10% to 12% in some years during the UPA regime from 2004 to 2014, compared to a maximum fall of 7.8% in a single year under the current administration’s eight-year tenure since 2014.
In a written response, the junior finance minister also attributed global factors such as the Russia-Ukraine war, soaring crude oil prices and tightening of global financial conditions as the cause for the depreciation of the Rupee against the US Dollar. “However, the Indian Rupee has strengthened against major currencies such as the British Pound, the Japanese Yen and the Euro,” he added.
When Congress MP Pramod Tiwari referred to remarks made by Prime Minister Narendra Modi in 2013 (in his tenure as Gujarat Chief Minister) on the fall of the Rupee leading to a drop in the country’s stature, Ms. Sitharaman said India’s economy had become one of the fragile five economies at the time.
“When the then Gujarat CM and current PM had given statements about the Indian currency in 2013, that was because India’s situation was quite serious on all other parameters as well. The economy had become one of the fragile five…. The economy had double digit inflation for 22 months and the Indian economy had reached such a serious situation just because of the taper tantrum,” she pointed out.
“Today, there is pandemic, recovery, second wave, Omicron, Russia-Ukraine war, the whole world’s supply chain is disrupted, India’s currency is still staying strong,” Ms. Sitharaman concluded.
On Tuesday, as per provisional data, the Rupee rose 41 paise to close at 78.65 vis-a-vis the US dollar, continuing to recover from the low of 80 to the US dollar it had hit a couple of weeks ago.
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