Lok Sabha Question No. 3852 (UNSTARRED), answered on 2025-03-24
Subject: Impact of depreciation of Rupee on Inflation and Essential Imports
Ministry: FINANCE
Asked by: Shri Kalyan Banerjee

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

## LOK SABHA UNSTARRED QUESTION NO. 3852

TO BE ANSWERED ON 24.03.2025

## IMPACT OF DEPRECIATION OF RUPEE ON INFLATION AND ESSENTIAL IMPORTS

## 3852. Shri Kalyan Banerjee:

Will the Minister of FINANCE be pleased to state:

(a) whether the Government has any taken any steps to control the impact of depreciation of the Rupee on inflation and essential imports;

(b) if so, the measures that are being taken by the Government to support industries that will be affected by U.S. Tariffs; and

(c) the long-term plans of the Government to strengthen the value of rupee against Dollar and to shield the economy from the external shock?

## ANSWER

## THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

(a) The depreciation of the Rupee is likely to enhance the export competitiveness, which in turn impacts the economy positively. On the other hand, depreciation may raise the prices of  imported  goods.  The  industries  reliant  on  imported  inputs  may  face  cost  pressures. However, the overall impact of exchange rate depreciation on domestic prices depends on the extent of the pass-through of international commodity prices to the domestic market.

Furthermore,  besides  exchange  rate  movements,  imports  are  determined  by  several  other factors,  including  global  supply-demand  conditions,  geopolitical  developments,  domestic demand,  and  factors  such  as Global  Value  Chain  integration  necessitating  imports  of intermediate  goods  for  production  and  exports.  Thus,  the  impact  of  movement  of  the exchange rate on the level of imports, the import cost and hence on domestic inflation cannot be isolated.

(b) As  on  date,  reciprocal  tariffs  have  not  been  applied  by  U.S.  on  India.    The Government  of  India  continues  to  engage  with  the  Government  of U.S.  to  achieve enhancement and broadening of bilateral trade ties in a mutually beneficial and fair manner. Both nations released a joint statement on February 13, 2025, reaffirming their commitment to deepening economic ties. Under the ambitious "Mission 500", both countries aim to more than double US-India trade to USD 500 billion by 2030 to be achieved by deepening the trade relationship across multiple sectors. Both countries plan to negotiate a mutually beneficial, multi-sector  Bilateral  Trade  Agreement.  Both  countries  would  focus  on  increasing  market access, reducing tariff and non-tariff barriers, and enhancing supply chain integration.

(c) The exchange rate of Indian Rupee is market-determined, with no target or specific level or band. The Reserve Bank of India (RBI) regulates the foreign exchange market with a view to ensure its orderly  functioning and development and intervenes only to curb undue volatility in the INR. The RBI monitors key developments across the globe which may have an impact on USD-Rupee exchange rate. Among others, it includes monetary policy actions of the major Central Banks, major economic data releases across the globe and their impacts thereof,  OPEC+  meeting  decisions,  tracking,  and  analysing  geo-political  events,  daily movements in G-10 and EME currencies, etc.