Lok Sabha Question No. 4239 (UNSTARRED), answered on 2023-03-27
Subject: Impact of the Fall in Rupee Value
Ministry: FINANCE
Asked by: D. M. Kathir Anand

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

## LOK SABHA UNSTARRED QUESTION NO. 4239 DUE FOR ANSWERED ON MARCH 27, 2023

## IMPACT OF THE FALL IN RUPEE VALUE

4239. Shri D. M. Kathir Anand :

Will the Minister of FINANCE be pleased to state:

(a)  the  details  of  the  problems  and  issues  faced  by  the  Government  and  Export-Import companies on account of the continuous fall of value of Rupee against the US Dollar and the remedial action taken by the Government in this regard; and

(b)  the  impact  of  the  weak  Rupee  on  the  importers  and  exporters  and  the  effective  measures taken by the Government to prevent Rupee falling further?

## ANSWER THE MINISTER OF STATE FOR FINANCE

## (SHRI PANKAJ CHAUDHARY)

(a) & (b) The depreciation of a currency is likely to enhance competitiveness of its exports while making imports of goods costlier. However, the exchange rate is only one of the several factors which  affect  demand  for  exports  and  imports  in  an  economy.  These  factors  include  kind  of tradeable (i.e. essential or luxury items), availability of substitutes, freight costs, income growth of exports demanding countries, etc. Thus, the impact of recent depreciation of the Indian Rupee against the US Dollar, on levels of exports and imports, and hence on the companies engaged in such exports and imports, cannot be isolated.

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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