Amid mounting political protests over a weak domestic currency, the central government said the domestic currency slipped against the US dollar due to global factors, but strengthened against the British pound, Japanese yen and euro.
The Finance Ministry, in a written reply to a question in Parliament, said that foreign portfolio investors have pulled out about $14 billion from Indian equity markets so far in the financial year 2022-23 and this outflow of foreign portfolio capital is a factor of depreciation of the Indian rupee. is the main reason. ,
It said that global factors such as Russia-Ukraine conflict, rising crude oil prices and tightening global financial conditions are the main reasons for the weakening of the Indian rupee against the US dollar.
From $63.33 a dollar in 2014, the rupee has fallen to $79.41 a dollar amid a widening trade deficit. The trade deficit has hit a record high and is expected to put further pressure on the domestic currency.
“Depreciation of a currency is likely to increase export competitiveness which in turn affects the economy positively. Depreciation affects imports by making them more expensive.
RBI regularly monitors the forex market and intervenes in situations of extreme volatility. The Reserve Bank of India has increased interest rates in recent months, increasing the attractiveness of holding Indian Rupees for residents and non-residents,” the ministry said.
Economists say that the pace of exports is slowing down due to the slowing global economy. Also, non-oil-non-gold imports are likely to increase in the near future as the Indian economy recovers from the pandemic.
The trade deficit widened to $25.6 billion in June from $24.3 billion in May. Imports rose to $63.6 billion in June, compared to $63.2 billion in May, while exports declined to $37.9 billion in June, from $38.9 billion in May.
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