Lok Sabha Question No. 2143 (UNSTARRED), answered on 2024-12-09
Subject: Depreciation in the Value of Indian Rupee
Ministry: FINANCE
Asked by: Shri Subbarayan K, Com. Selvaraj V

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 2143

TO BE ANSWERED ON 09.12.2024

## DEPRECIATION IN THE VALUE OF INDIAN RUPEE

2143. Com. Selvaraj V: Shri Subbarayan K:

Will the Minister of FINANCE be pleased to state:

- (a) whether there has been a sharp depreciation in the value of rupee compared to dollar during the last ten years;
- (b) if so, the details and reasons thereof; and
- (c) the impact of such depreciation on the trade and inflation and the action taken by the RBI to smoothen the fluctuation in the value of Rupee?

## ANSWER

THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

- (a) The  exchange  rate  of  the  Indian  Rupee  (INR)  against  the  US  Dollar  (USD)  was ₹ 63.04/USD on December 31, 2014 and ₹ 84.70/USD on December 03, 2024. The calendar year-end values of the exchange rate from 2014 onwards are given in the table below:

| Date              | USD INR exchange rate   | Annual Change (%)   |
|-------------------|-------------------------|---------------------|
| 31-Dec-14         | 63.04                   |                     |
| 31-Dec-15         | 66.15                   | -4.70%              |
| 30-Dec-16         | 67.93                   | -2.62%              |
| 29-Dec-17         | 63.87                   | 6.36%               |
| 31-Dec-18         | 69.77                   | -8.46%              |
| 31-Dec-19         | 71.38                   | -2.26%              |
| 31-Dec-20         | 73.07                   | -2.31%              |
| 31-Dec-21         | 74.34                   | -1.71%              |
| 30-Dec-22         | 82.74                   | -10.15%             |
| 29-Dec-23         | 83.21                   | -0.56%              |
| 3-Dec-24          | 84.70                   | -1.76% #            |
| #till Dec 3, 2024 | #till Dec 3, 2024       | #till Dec 3, 2024   |

(b) The value of the  INR is market-determined, with no target or specific level or band. Various  domestic  and  global  factors  influence  the  exchange  rate  of  the  INR,  such  as  the movement of the Dollar Index, trend in capital flows, level of interest rates, movement in crude prices,  current  account  deficit  etc.  During  the  current  calendar  year  2024,  one  of  the  main reasons for this depreciation of INR has been the broad-based strength of the USD, which has exerted pressure on emerging market currencies. Further, geopolitical tensions in the Middle East and uncertainty surrounding US election results also added to the headwinds.

(c) The depreciation of currency is likely to enhance the export competitiveness, which in turns impacts the economy positively. On the other hand, depreciation may raise the prices of imported good. However, the overall impact of exchange rate depreciation on domestic prices depends  on  the  extent  of  pass  through  of  international  commodity  prices  to  the  domestic market. Furthermore, the imports in the economy also depends on various factors including the demand and supply of commodities in the international market, kind of tradeable (i.e. essential or  luxury  items),  freight  costs,  availability  of  substitutes  goods  etc.  Thus,  the  impact  of movement of the exchange rate on the imports and domestic inflation cannot be isolated.

The RBI monitors key developments across the globe which may have an impact on USD-INR 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.  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 has announced various measures in the last three years to diversify and expand the sources  of  forex  funding  to  mitigate  exchange  rate  volatility  and  dampen  global  spillovers. Incremental Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee  (NRE)  deposit  liabilities  were  exempt  from  the  maintenance  of  CRR  and  SLR  for deposits mobilised up to November 4, 2022. Fresh FCNR(B) and NRE deposits were exempted from the extant regulation on interest rates (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  FPI  investment  in  debt  flows  has  been  revised  to  encourage foreign  investment  in  Indian  debt  instruments.  The  External  Commercial  Borrowing  limit (under automatic route) was raised to $1.5 bn and the all-in-cost ceiling was raised by 100 bps in  select  cases  up  to  December  31,  2022.  AD  Cat-I  banks  could  utilise  overseas  foreign currency borrowing for lending in foreign currency to end use prescriptions as applicable to external commercial borrowings.

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