Lok Sabha Question No. 65 (STARRED), answered on 2022-12-12
Subject: Currency Devaluation and Foreign Exchange Reserves
Ministry: FINANCE
Asked by: Anumula Revanth Reddy

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## STARRED QUESTION NO. 65

TO BE ANSWERED ON DECEMBER 12, 2022

## CURRENCY DEVALUATION AND FOREIGN EXCHANGE RESERVES

## 65. Shri Anumula Revanth Reddy

Will the Minister of FINANCE be pleased to state:

(a) whether the Government has taken note of the fact that the Indian currency is weakening day-by-day  and  has  hit  Rs.  83  per  US  dollar  for  the  first  time  ever  and  if  so,  the  details thereof and the reasons therefor; (b) whether the Reserve Bank of India (RBI) has been using forex reserves to stem the fall in the Indian currency and if so, the details thereof; (c) whether the RBI has sold US dollars between Rs. 78.97 and Rs. 78.98 per US dollar and significantly increased its foreign exchange reserves to prevent the rapid devaluation of the rupee and if so, the details thereof and the reasons therefor; (d) the details of the measures taken by the RBI to bolster the forex inflows while ensuring (e) whether the Government has taken any steps to stem the rupee's slide against the dollar overall macroeconomic and financial stability during each of the last three years; and and if so, the details thereof and if not, the reasons therefor?

## ANSWER

THE MINISTER OF FINANCE (SMT. NIRMALA SITHARAMAN)

(a) to (e): A statement is laid on the Table of the House.

## STATEMENT REFERRED TO IN REPLY TO THE LOK SABHA STARRED QUESTION NO. 65 RAISED BY SHRI ANUMULA REVANTH REDDY FOR 12 th  DECEMBER, 2022 ON 'CURRENCY DEVALUATION AND FOREIGN EXCHANGE RESERVES'

(a) The exchange rate of the Indian Rupee (INR) against the dollar was Rs 83.20 per dollar on October 20, 2022. The value of INR is market-determined. As global spillovers from geopolitical  tensions  and  aggressive  monetary  policy  tightening  across  the  world  intensified alongside a surge in crude oil prices, the US dollar strengthened by 7.8% in the financial year (till  November  30,  2022).  The  INR  depreciated  by  6.9%  in  the  current  financial  year  (till November 30, 2022). It has performed better than most Asian peer currencies, including the Chinese  Renminbi  (10.6%),  Indonesian  Rupiah  (8.7%),  Philippine  Peso  (8.5%),  South Korean Won (8.1%), Taiwanese Dollar (7.3%) etc during the financial year.

(b) & (c): The Reserve Bank of India (RBI) closely monitors the foreign exchange markets and intervenes only to maintain orderly market conditions by containing excessive volatility in the exchange rate, without reference to any pre-determined target level or band. During the financial  year,  the  RBI's  operations  have  resulted  in  net  sales  of  US$33.42  billion  till September 2022 (settlement basis).

(d)  &  (e):  The  RBI  had  announced  various  measures  in  the  recent  period  to  diversify  and expand the sources of forex funding to mitigate exchange rate volatility and dampen global spillovers. Some of these measures are:

-  Incremental  Foreign  Currency  Non-Resident  (Bank)  [FCNR(B)]  and  Non-Resident (External) Rupee (NRE) deposit liabilities were  exempted from the maintenance of cash reserve ratio (CRR) and statutory liquidity ratio (SLR) for deposits mobilized up to November 4, 2022.
-  Fresh  FCNR(B)  and  NRE  deposits  were  exempted  from  the  extant  regulation  on interest rates (i.e. interest rates shall not be higher than those offered by the banks on comparable domestic rupee term deposits) till October 31, 2022.
-  Further, the regulatory regime relating to foreign portfolio investments in debt flows has been revised to encourage foreign investment in Indian debt instruments.
-  The external commercial borrowing limit (under automatic route) has been raised to US$1.5 bn and the  all-in-cost  ceiling  has  been  raised  by  100  basis  points  in  select cases up to December 31, 2022.
-  Authorized dealer Category 1 Banks can utilize overseas foreign currency borrowing for  lending  in  foreign  currency  to  end  use  prescriptions  as  applicable  to  external commercial borrowings.
-  In  order to  promote the  growth of exports from India and to support the increasing interest of the global trading community in the Indian Rupee, RBI has put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in INR on July 11, 2022.

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