The recent depreciation in the value of the Indian rupee against the US dollar is due to global factors like the Russia-Ukraine conflict, soaring crude oil prices, and tightening of global financial conditions, the government said in the Lok Sabha on Monday.
In reply to a starred question in the Lok Sabha, the central government said, "global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions are the major reasons for the weakening of the Indian Rupee against the US dollar."
However, the government informed the lower house of Parliament that the Indian currency has strengthened against other major global currencies.
"Currencies such as the British pound, the Japanese yen and the Euro have weakened more than the Indian rupee against the US dollar and therefore, the Indian rupee has strengthened against these currencies in 2022," the government said in the Lok Sabha.
On the impact of the depreciation in the value of the rupee on the economy, the government said that currency fluctuation is only one of the factors that impact an economy.
The government said the depreciation of the currency is likely to enhance the export competitiveness which in turn impacts the economy positively.
The depreciation of the currency also impacts imports by making them more costly, the government said.
The Reserve Bank of India (RBI) regularly monitors the foreign exchange market and intervenes in situations of excess volatility. The Reserve Bank of India has raised interest rates in recent months that increase the attractiveness of holding the Indian rupee for residents and non-residents, the government said.
The government further added that the outflow of foreign portfolio capital is a major reason for the depreciation of the Indian rupee.
Monetary tightening in advanced economies, particularly in the United States of America, lends to cause foreign investors to withdraw funds from emerging markets.
Foreign portfolio investors have withdrawn nearly $14 billion from the Indian equity markets in the financial year 2022-23 so far, the government informed the Lok Sabha.
( With inputs from ANI )
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