Wednesday, Oct 05, 2022

Govt Watchful And Mindful Of Impact Of Declining Rupee On Imports: FM Sitharaman

Depreciation of rupee makes India's imports costlier, while on the other hand exports become attractive

Nirmala Sitharaman

The government is watchful and mindful of the impact of falling rupee on the country's imports, finance minister Nirmala Sitharaman said, while asserting that Indian currency has performed relatively better than others against dollar.

Depreciation of rupee makes India's imports costlier, while on the other hand exports become attractive.

"The Reserve Bank of India is very keenly watching the exchange rate. We are not alone in this world. We are also open as an economy... the rupee against the dollar and other currencies versus the dollar, the rupee has performed relatively better," she said.

Acknowledging that falling rupee would impact immediately on imports, which will become expensive, she said, "That is one thing I am very watchful and mindful of because a lot of our industries do depend on some essential goods to be imported upon for their production."

Emerging market currencies have been falling against the dollar amid geopolitical tensions in the wake of the Russia-Ukraine war, concerns over growth, high global crude prices, sustained inflation and central banks worldwide adopting hawkish monetary policy approach.

The rupee breached the psychologically significant level of 79 per dollar level for the first time ever on Wednesday and has also hit a series of lifetime lows this month.

In its Financial Stability Report (FSR) released on Thursday, the Reserve Bank of India (RBI) said the rupee has performed relatively better than its peers.

"While the Indian Rupee (INR) has been subjected to bouts of downward pressure, it has emerged among the better performing currencies relative to peers," the 25th FSR report said.

The rupee hit its all-time low of 79.12 against dollar during the intra-day trade but recovered to close at 78.94 (provisional) against the greenback on Friday.

Since the war in Ukraine broke out in late February, the RBI has expended its foreign exchange reserves in order to shield the rupee from steep depreciation. Since February 25, the headline foreign exchange reserves have declined by USD 40.94 billion.