Lok Sabha Question No. 1950 (UNSTARRED), answered on 2023-03-13
Subject: Decline in the Value of Indian Currency against US Dollars and Euro
Ministry: FINANCE
Asked by: Su Thirunavukkarasar

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 1950

TO BE ANSWERED ON MARCH 13, 2023

## DECLINE IN THE VALUE OF INDIAN CURRENCY AGAINST US DOLLARS AND EURO 1950. SHRI THIRUNAVUKKARASAR SU:

Will the Minister of FINANCE be pleased to state:

- (a) whether the value of Indian rupee has been declining continuously during the last six months and has come down to an all time low against US Dollar and Euro;
- (b) if so, the details thereof during each of the last six months and the reasons therefor; and
- (c) the fiscal measures taken by the Government to shore up the value of Indian rupee?

## ANSWER

THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

(a) & (b): The Indian Rupee closed at ₹83.02 against US Dollar (USD) on 19 th  October, 2022. On 20 th  October, 2022 it touched an intraday low of ₹83.29/USD and closed at ₹82.76/USD. Further, the Indian Rupee touched an intraday low of ₹90.47 against the Euro on 2 nd  February, 2023 and closed the day at ₹90.39/Euro.

The average exchange rate of the Rupee against the USD and Euro for the last six months is presented in the table below.

Table: Average Exchange Rate of Indian Rupee against USD and Euro ₹/Unit of Currency

| Month    |   US Dollar |    Euro |
|----------|-------------|---------|
| Sep-2022 |     80.2316 | 79.459  |
| Oct-2022 |     82.3373 | 80.7624 |
| Nov-2022 |     81.8105 | 83.4606 |
| Dec-2022 |     82.4642 | 87.2945 |
| Jan-2023 |     81.8996 | 88.2133 |
| Feb-2023 |     82.4845 | 88.9539 |

Source: Reserve Bank of India.

The  Rupee  came  under  depreciation  pressure  from  March  2022  onwards  as  geo-political tensions worsened and US Federal Reserve began its monetary policy tightening which led to a surge in crude oil prices and capital outflows from domestic financial markets as global financial market conditions tightened. The Dollar Index strengthened to a two-decade high on account of

US interest rate hikes (totalling 4.5 percentage points since March 2022) and is currently up by around 6.7% in 2022-23 (till February 28, 2023).

INR, which had earlier weakened by as much as 8.7% against the USD (till 19 th  October, 2022) on  account  of  the  factors  mentioned  above,  has  since  pared  some  of  the  losses  and  its depreciation stands at about 8.3% in the current financial year (till 28 th  February, 2023). Further, it  has performed better than many emerging market peer currencies, including South African Rand (which has depreciated against USD by  20.4% over the same period), Brazilian Real (9.5%), Chinese Renminbi (8.6%), South Korean Won (8.4%), etc.

- (c):   The value of Indian Rupee is market-determined. 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 predetermined target level or band.   RBI has announced various measures in the recent period to diversify and expand the sources of forex funding to mitigate exchange rate volatility and dampen global spill overs.  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 4 th  November, 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 31 st  October, 2022.
-  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  31 st December, 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 11 th  July, 2022.

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