Lok Sabha Question No. 2822 (UNSTARRED), answered on 2016-12-02
Subject: Weakening Indian Rupee
Ministry: FINANCE
Asked by: ADHIR RANJAN CHOWDHURY, ALOK SANJAR, SHIVKUMAR CHANABASAPPA UDASI

- (a) whether  the  Government  is  aware  of  the  weakening  Indian  rupee,  if  so,  the  details  thereof  and  its impact on various sectors, sector-wise;
- (b) whether the weakening of rupee is due to Brexit fallout and if so, the details thereof;
- (c)  the  steps  taken  by  the  Government  to  curb/check  the  weakening  of  rupee  and  ensure  economic growth including export growth; and
- (d) the extent to which the pacts signed during the BRICS and BIMSTEC conclaves have had a positive effect on appreciation of rupee value?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI ARJUN RAM MEGHWAL)

- (a) The rupee has depreciated against the US dollar while it has appreciated against pound sterling in 2016-17 (April-October). The appreciation and depreciation of the rupee against the US dollar and some major currencies is given in table below:

Appreciation (+)/Depreciation (-) of Indian Rupee against major currencies (per cent)

|                     |   US Dollar |   Pound Sterling |   Euro |   Japanese Yen |
|---------------------|-------------|------------------|--------|----------------|
| 2014-15             |       -1.04 |            -2.3  |   4.71 |           8.2  |
| 2015-16             |       -6.61 |            -0.15 |   7.24 |           2.26 |
| 2016-17 (Apr.-Oct.) |       -3.82 |             9.36 |  -4.55 |         -16.95 |

Source: Reserve Bank of India

The impact of appreciation or depreciation of Indian Rupee on different sectors of  the Indian economy depends on a number of factors like elasticity of exports and imports, import intensity of exports, relative prices of domestic and global products, etc.  The softening of international commodity prices, particularly crude oil prices, notwithstanding the moderate nominal depreciation of the rupee vis-à-vis the US dollar , will  have  favourable  impact  on  the  value  of  imports,  trade  and  current  account  balances  as  well  as macroeconomic stability.

- (b)  The  rupee  depreciated  against  the  US  dollar  by  around  1  per  cent  for  one  day  after  the  Brexit referendum, while currencies of other emerging markets depreciated for many days. But on a cumulative basis, the rupee has actually appreciated by 0.2 per cent on 25 th July 2016 over 23 rd June 2016.
- (c) & (d) The exchange rate of the rupee is by and large market determined and is not affected by any specific  pacts  or  agreements.  The  exchange  rate  policy  of  the  RBI  is  aimed  at  managing  excessive volatility and maintaining orderly conditions without having any fixed target or band for the exchange rate. India's economic growth of 7.6 per cent in 2015-16 is one of the highest among the major economies in the  world.    Though  India's  exports  were  affected  due  to  the  global  slowdown,  recently  exports  are showing signs of revival with positive growths of 4.0 per cent and 9.6 per cent in September 2016 and October 2016 respectively. The Government and the RBI are closely monitoring the emerging external situation including exchange rate of the rupee in nominal and real terms and calibrating policies on an ongoing basis to support robust macroeconomic outcomes.