NEW DELHI, Feb 2: Finance Minister Nirmala Sitharaman addressed the recent criticism surrounding the depreciation of the Indian rupee. She emphasized that the rupee has only weakened against a resilient US dollar, while maintaining stability against other currencies due to robust macroeconomic fundamentals.
In an interview with PTI, she acknowledged that the rupee’s recent 3% decline against the US dollar is a concern, particularly as it increases the cost of imports. However, she dismissed claims of widespread rupee weakness.
“I am concerned, but I reject the criticism that the rupee is weakening!” she stated. “Our macroeconomic fundamentals are strong. If they were not, the rupee would not remain stable against other currencies.”
Despite recent pressure on the Indian rupee, it remains one of the least volatile currencies against the US dollar compared to its Asian and global counterparts. The rupee’s decline can be attributed to factors such as a widening trade deficit and a rising dollar index, particularly after indications from the US Federal Reserve suggesting fewer rate cuts in 2025.
The Reserve Bank of India has reportedly utilized USD 77 billion from its foreign exchange reserves to stabilize the rupee in the spot market, reducing India’s foreign exchange reserves to USD 629.557 billion as of January 30, 2024, from USD 701.176 billion on October 4, 2024.
“The volatility of the rupee is primarily against the dollar. In comparison, it has shown more stability than many other currencies,” stated Sitharaman.
She noted that the rupee’s fluctuations are evident primarily due to the strength of the dollar. “The RBI is actively exploring mechanisms to intervene in the market to mitigate excessive volatility. We are all attentively monitoring the situation,” she added.
Sitharaman criticized those blaming rupee volatility on a lack of understanding. “These critiques tend to oversimplify the situation. It is important to contextualize the rupee’s performance within the current strengthening dollar environment and the implications of the new US administration. While criticisms may arise, they must be accompanied by a more informed analysis,” she concluded. (Agencies)
