Lok Sabha Question No. 1011 (UNSTARRED), answered on 2016-04-29
Subject: Value of Rupee
Ministry: FINANCE
Asked by: DODDAALAHALLI KEMPEGOWDA SURESH

- (a) whether there is continuous depreciation in value of Indian rupee in the recent years, if so, the details thereof against US dollar, UK pound and Euro along with the reasons therefor for the last three years;
- (b) whether the depreciation in rupee value depleted the country's foreign exchange reserves significantly, if so, the details thereof; and
- (c) the effective measures taken by the Government to arrest the depreciation in rupee value?

## ANSWER

## MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI JAYANT SINHA)

- (a) The  average  exchange  rate  of  the  rupee  vis-à-vis  US  dollar,  UK  pound  and  euro  since 2013-14 is given in Table 1 below. During 2013-14, the rupee depreciated mainly on account of elevated levels of current account deficit in India and relatively inadequate capital or financial flows of the stable variety to finance it. In 2014-15, Indian rupee depreciated against US dollar and UK pound by 1.0 per cent and 2.3 per cent respectively and appreciated against euro by 4.7 per cent on account of lower trade and current account deficits coupled with higher capital inflows.  The  depreciation  in  2015-16  of  the  rupee  vis-à-vis  US$  to  the  tune  of  6.6  per  cent largely  reflects  the  general  appreciation  of  the  US  dollar  globally  against  most  currencies. During this period, euro and pound depreciated by 12.5 per cent and 6.7 per cent respectively against US dollar.

| Table 1: Indian rupee vis-à-vis US dollar, GBP and Euro (Annual Average Exchange Rate)   | Table 1: Indian rupee vis-à-vis US dollar, GBP and Euro (Annual Average Exchange Rate)   | Table 1: Indian rupee vis-à-vis US dollar, GBP and Euro (Annual Average Exchange Rate)   | Table 1: Indian rupee vis-à-vis US dollar, GBP and Euro (Annual Average Exchange Rate)   |
|------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|
| Year                                                                                     | Rs. / USD                                                                                | Rs. / GBP                                                                                | Rs. / Euro                                                                               |
| 2013-14                                                                                  | 60.5019 (-10.1)                                                                          | 96.3058 (-10.7)                                                                          | 81.1745 (-13.7)                                                                          |
| 2014-15                                                                                  | 61.1436 (-1.0)                                                                           | 98.5731 (-2.3)                                                                           | 77.5209 (4.7)                                                                            |
| 2015-16                                                                                  | 65.4685 (-6.6)                                                                           | 98.7260 (-0.2)                                                                           | 72.2894 (7.3)                                                                            |

USD: US dollar. GBP: UK pound.

Note: Appreciation (+)/Depreciation (-) is indicated in parenthesis in percentage terms vis-à-vis the previous year. Source: RBI

While in nominal terms the rupee may have depreciated, in terms of real effective exchange rates which indicate the competitiveness of the economy, the rupee appreciated in 2014-15 and 2015-16.

- (b) Foreign exchange reserves have increased in the last three years (Table 2).

| Table 2: India's Foreign Exchange Reserves (US$ billion)   |   Table 2: India's Foreign Exchange Reserves (US$ billion) |
|------------------------------------------------------------|------------------------------------------------------------|
| end-March 2014                                             |                                                      304.2 |
| end-March 2015                                             |                                                      341.6 |
| end-March 2016                                             |                                                      360.2 |

(c) The exchange rate of the rupee is market determined and is impacted by both domestic as well  as  external  developments.  The  exchange  rate  policy  is  aimed  at  managing  excessive volatility  and  maintaining  orderly  conditions  without  having  any  fixed  target  or  band  for  the exchange rate. The Government and the Reserve Bank of India (RBI) are closely monitoring the emerging external position including exchange rate of the rupee in nominal and real terms on an on-going  basis  and  are  calibrating  policies  or  regulations  to  support  robust  macroeconomic outcome.

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