Finance Minister Nirmala Sitharaman addressed concerns regarding the Indian rupee's recent depreciation against the US dollar, stating that it has remained stable against other currencies due to strong macroeconomic fundamentals.
In an interview with PTI, Sitharaman acknowledged the 3% depreciation of the rupee against the US dollar in recent months, highlighting that while it does make imports costlier, it does not indicate an all-round weakness in the local currency.
"I am concerned, but our macroeconomic fundamentals are strong. The rupee wouldn't be stable against all currencies if our fundamentals were weak," she emphasized.
The Indian rupee has faced pressure in recent months but maintains its position as the least volatile currency against the US dollar among Asian and global counterparts. Factors contributing to the rupee's decline include a widening trade deficit and a surge in the dollar index following indications of fewer rate cuts by the US Federal Reserve.
Reports suggest that the Reserve Bank of India has utilized USD 77 billion from its foreign exchange reserves to prevent a sharp decline in the rupee's value, resulting in a decrease in India's foreign exchange reserves from USD 701.176 billion to USD 629.557 billion as of January 30, 2024.
Sitharaman addressed concerns about rupee volatility, noting that the currency has demonstrated stability amidst the strengthening US dollar. She mentioned that the RBI is monitoring the situation closely and will intervene in the market as needed to maintain stability.
Regarding criticisms about rupee volatility, Sitharaman emphasized the need for a more nuanced understanding of the currency's relationship with the dollar, especially in the current economic environment. She urged critics to consider the complexities involved before making quick judgments.
