Finance Minister Nirmala Sitharaman defended the recent depreciation of the Indian rupee on Sunday, stating that it has only weakened against the US dollar due to its strengthening, while remaining stable against other currencies due to strong macroeconomic fundamentals.
Speaking to PTI, she acknowledged the 3% depreciation of the rupee against the US dollar in recent months, which raises concerns about the increased cost of imports. However, she refuted claims that the rupee has shown overall weakness, emphasizing the stability against other currencies.
Sitharaman highlighted that despite the pressure on the Indian rupee in the past few months, it continues to be the least volatile currency against the US dollar among Asian and global peers. The reasons for the rupee’s decline include a widening trade deficit and the US Federal Reserve’s indication of fewer rate cuts in 2025, leading to a surge in the dollar index.
The Reserve Bank of India (RBI) reportedly spent $77 billion from its foreign exchange reserves to support the rupee in the spot market, decreasing India’s foreign exchange reserves to $629.557 billion as of January 30, 2024, from $701.176 billion on October 4, 2024.
Sitharaman stressed that the rupee’s volatility is primarily against the US dollar, which is strengthening. She noted that the RBI is closely monitoring the situation and intervening in the market to prevent excessive volatility.
Regarding criticisms of rupee volatility and depreciation, Sitharaman called for a more comprehensive understanding of the currency’s relationship with the dollar and the factors influencing its fluctuations. She emphasized the need for a nuanced analysis amid the current environment of dollar strengthening and the new US administration.
In conclusion, Sitharaman dismissed criticisms without detailed study and emphasized the need for a more informed response to the rupee’s performance in the global market.
