Rupee has depreciated by 25% since December 2014
New Delhi:
The Indian rupee has fallen nearly 25 per cent since December 31, 2014, and is close to 80 against the dollar, the Lok Sabha was informed on Monday.
The rupee depreciated from 63.33 against the dollar on 31 December 2014 to 79.41 on 11 July 2022, Finance Minister Nirmala Sitharaman said in a reply quoting RBI data.
Finance Minister Nirmala Sitharaman said in a written reply that the exchange rate of the Indian rupee against the dollar was Rs 78.94 per dollar till June 30, 2022.
The rupee on Monday ended the session 16 paise lower at 79.98 (provisional) amid spurt in crude oil prices and foreign fund outflow.
He said 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.
He said that currencies like British Pound, Japanese Yen and Euro have weakened more against the Indian Rupee against the US Dollar and hence, the Indian Rupee has strengthened against these currencies in 2022.
Foreign portfolio capital outflow is a major reason for the depreciation of the Indian rupee, he said, adding that monetary tightening in advanced economies, especially in the United States, causes foreign investors to withdraw funds from emerging markets.
He said foreign portfolio investors have pulled out around $14 billion from Indian equity markets in 2022-23 so far.
On the impact of currency depreciation, he said, the nominal exchange rate is only one of the factors affecting the economy.
A depreciation of a currency is likely to increase export competitiveness, which in turn positively affects the economy, while depreciation affects imports by making them more expensive.
The Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of extreme volatility. It has increased interest rates in recent months, increasing the attractiveness of residents and non-residents to hold the Indian rupee.
Earlier this month, the RBI raised foreign borrowing limits for companies and liberalized norms for foreign investment in government bonds as it announced measures to boost foreign exchange inflows.
RBI raised the ECB limit under the automatic route from $750 million or its equivalent per financial year to $1.5 billion, and relaxed norms for foreign portfolio investment in the debt market.