Lok Sabha Question No. 5 (STARRED), answered on 2022-07-18
Subject: Depreciation of Indian Currency
Ministry: FINANCE
Asked by: Deepak Baij, Vijayakumar (alias) Vijay Vasanth

5. Shri Deepak Baij:

Shri Vijayakumar (Alias) Vijay Vasanth:

Will the Minister of FINANCE be pleased to state:

(a) whether Indian rupee has fallen historically low in comparison to US dollar during the month of June, 2022;

(b) if so, the details thereof and the reasons therefor along with the value of Indian rupee against US dollar in each year from 2014 to 2022;

(c)  whether Indian rupee has reached equal to Bhutan's currency on 29th June, and 30th June, 2022 and if so, the reasons for steep decline in the value of Indian currency;

(d)  whether  any  review/study  has  been  made  by  the  Government  in  this  regard  to  access  its impact on Indian Economy/people and various sectors of the country and if so, the details thereof;

(e) whether the Government has taken any steps to contain the downfall of Indian rupee, if so, the details thereof and if not, the reasons therefor; and

(f) whether the depreciation in Indian rupee has caused huge flow of money from abroad to India and if so, the details thereof?

## ANSWER

THE FINANCE MINISTER

(SMT. NIRMALA SITHARAMAN)

- (a) To (f) : A statement is laid on table of the House.

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA

## STARRED QUESTION NO. 5

TO BE ANSWERED ON JULY 18, 2022

## DEPRECIATION OF INDIAN CURRENCY

## STATEMENT REFERRED TO IN REPLY TO THE LOK SABHA STARRED QUESTION NO. 5 RAISED BY Shri Deepak Baij and Shri Vijayakumar (Alias) Vijay Vasanth FOR 18 TH  JULY, 2022 ON 'DEPRECIATION OF INDIAN CURRENCY'

…..

(a) and (b) Yes Sir. The exchange rate of the Indian Rupee against the dollar was Rs 78.94 per dollar  as  of  June  30,  2022.    The  calendar  year-end  values  of  the  exchange  rate  of  the  Indian Rupee  against  the  US  Dollar  from  2014  are  in  Annexure.  Global  factors  such  as  the  RussiaUkraine conflict, soaring crude oil prices and tightening of global financial conditions are the major reasons for  the  weakening  of  the  Indian  Rupee  against  the  US  Dollar.  Currencies  such  as  the British pound, the Japanese yen and the Euro have weakened more than the Indian rupee against the US dollar and therefore, the Indian rupee has strengthened against these currencies in 2022.

- (c) No Sir. The Bhutanese Ngultrum (BTN) has been pegged at par with the Indian Rupee since its introduction in 1974 and moves in tandem with the Indian Rupee.
- (d)  and  (e)  Nominal  exchange  rate  is  only  one  of  the  factors  that  impact  an  economy.  The depreciation of a currency is likely to enhance the export competitiveness which in turn impacts the economy positively. The depreciation also impacts the imports by making them more costly. The Reserve  Bank  of  India  (RBI)  regularly  monitors  the  foreign  exchange  market  and  intervenes  in situations of excess volatility. The Reserve Bank of India has raised interest rates in recent months that increase the attractiveness of holding Indian rupees for residents and non-residents.

Further,  recent  measures  taken  by  RBI  include  1)  Exemption  of  Incremental  Foreign  Currency Non-Resident  (Bank)  [FCNR(B)]  and  Non-Resident  (External)  Rupee  (NRE)  deposits  from  the maintenance of CRR and SLR up to November 4, 2022; 2) Exemption of fresh FCNR(B) and NRE deposits from the extant regulation on interest rates to allow banks to provide higher interest rates till October 31, 2022 than those offered to comparable domestic rupee term deposits with a view to attract  foreign  currency  deposits;  3)  Revision  of  regulatory  regime  relating  to  Foreign  Portfolio Investment in debt flows to encourage foreign investment in Indian debt instruments; 4) Raising of External  Commercial  Borrowing  limit  (under  automatic  route)  to  $1.5  billion  and  the  all-in-cost ceiling  by  100  bps  in  select  cases  up  to  December  31,  2022;  5)  Allowing  Authorised  Dealer Category-I (AD Cat-I) banks to utilise overseas foreign currency borrowing for lending in foreign currency  to  entities  for  a  wider  set  of  end-use  purposes,  subject  to  the  negative  list  set  out  for external commercial borrowings.

- (f)  The  outflow  of  foreign  portfolio  capital  is  a  major  reason  for  the  depreciation  of  the  Indian Rupee. Monetary tightening in advanced economies, particularly in the United States of America, tends  to  cause  foreign  investors  to  withdraw  funds  from  emerging  markets.  Foreign  portfolio investors have withdrawn about $14 bn from Indian equity markets in FY 2022-23 so far.

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INR/US$ Exchange Rate

| Date       |   INR/US$ |
|------------|-----------|
| 11-07-2022 |     79.41 |
| 31-12-2021 |     74.3  |
| 31-12-2020 |     73.05 |
| 31-12-2019 |     71.27 |
| 31-12-2018 |     69.79 |
| 29-12-2017 |     63.93 |
| 30-12-2016 |     67.95 |
| 31-12-2015 |     66.33 |
| 31-12-2014 |     63.33 |

Source: Reserve Bank of India

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## ANNEXURE