Lok Sabha Question No. 2429 (UNSTARRED), answered on 2023-12-18
Subject: Value of Indian Rupee against US Dollar
Ministry: FINANCE
Asked by: Dr. T. Sumathy (a) Thamizhachi Thangapandian

## GOVERNMENT OF INDIA MINISTRY OF FINANCE

## DEPARTMENT OF ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO. 2429

TO BE ANSWERED ON MONDAY, 18 DECEMBER, 2023

## VALUE OF INDIAN RUPEE AGAINST US DOLLAR

2429. DR. T. SUMATHY (a) THAMIZHACHI THANGAPANDIAN:

Will the Minister of FINANCE be pleased to state:

- (a) whether the value of Indian Rupee against US Dollar which was at Rs. 59.18 per US Dollar on 30 May 2014 has declined to Rs. 83.34 per US Dollar on 24 November 2023, if so, the details thereof and the reasons therefor;
- (b) whether the continuous depreciation of the value of INR against US Dollar has heavy impact on the country's trade with foreign countries especially the huge imports we rely on China, USA, UAE, Middle East countries, European Union etc., if so, the details thereof;
- (c) the steps taken or likely to be taken by the Government to control the decline in value of INR against the US Dollar and to maintain a balance of trade; and
- (d) the expenditure incurred in terms of US Dollar for imports during the last five years and Forex gained during the corresponding years, year-wise?

## ANSWER

THE MINISTER OF STATE FOR FINANCE (SHRI PANKAJ CHAUDHARY)

- (a) The exchange rate of the Indian Rupee against the US Dollar on May 30, 2014 and November 24, 2023 are given in Table 1

Table 1: The exchange rate of the Indian Rupee against the US Dollar

| Date              |   Exchange Rate of INR against USD |
|-------------------|------------------------------------|
| May 30, 2014      |                              59.03 |
| November 24, 2023 |                              83.37 |

Note: Figures rounded off to two decimal places

Source: Reserve Bank of India /FBIL reference rates

The  value  of  the  Indian  Rupee  is  market-determined.  Global  spillovers  from  geo-political tensions, aggressive monetary policy tightening across the world and recent surge in crude oil prices are some of the factors exerting pressure on the Indian Rupee against the US Dollar.

(b) The depreciation of a currency is likely to enhance the 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 the 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 cannot be isolated.

(c) The  exchange  rate  of  Indian  Rupee  (INR)  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 while eschewing undue volatility.  The  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 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.
-  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.

Further,  several  steps  have  been  taken  by  the  Government  of  India  to  boost  exports  and reducing dependence on imports keeping in view India's increased integration in the global value  chain.  Some  of  the  measures  include  providing  export  incentives,  easing  trade processes  through  digital  platforms,  and  negotiating  free  trade  agreements  (FTAs)  with various countries and blocs to enhance market access for Indian products. Regular monitoring of  export  performance  with  Commercial  Missions  abroad,  Export  Promotion  Councils, Commodity  Boards/  Authorities  and  Industry  Associations  is  being  done  and  corrective measures are being taken from time to time. Further, the new Foreign Trade Policy has been launched  with  effect  from  1st  April,  2023.  The  policy  lays  down  a  blue  print  to  integrate India with the global market and make it a reliable and trusted trade partner. It will further improve India's trade performance and competitiveness.

- (d) The data on India's import payments and foreign exchange reserves are presented in Table 2 below.

Table 2: India's import and foreign exchange reserves

| (US$ billion)   | (US$ billion)                         | (US$ billion)   | (US$ billion)   | (US$ billion)   | (US$ billion)   | (US$ billion)   |
|-----------------|---------------------------------------|-----------------|-----------------|-----------------|-----------------|-----------------|
| S.No.           | Items                                 | 2018-19         | 2019-20         | 2020-21         | 2021-22         | 2022-23         |
| 1.              | Import Payments                       | 517.5           | 477.9           | 398.5           | 618.6           | 721.4           |
| 2.              | Foreign Exchange Reserves (end-March) | 412.9           | 477.8           | 577.0           | 607.3           | 578.4           |
| 3.              | Change in Foreign Exchange Reserves   | -11.7           | 64.9            | 99.2            | 30.3            | -28.9           |

Source: RBI.

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