In response to Lok Sabha Unstarred Question No. 1145, the Ministry of Finance addressed the reasons behind the continuous depreciation of the Indian Rupee (INR) against the US Dollar. The INR’s decline, by 1.4% in 2024 until November, is attributed to a strong US Dollar, which has risen by 4.8%, alongside geopolitical tensions and uncertainties, particularly in the Middle East and around the US elections. The Ministry explained that the rupee’s value is influenced by several factors such as global capital flows, crude oil prices, interest rates, and the current account deficit. While the fall in the rupee may make exports more competitive, it could also increase the cost of imports. Despite the depreciation, the INR remains one of the best-performing Asian currencies, reflecting India’s strong economic fundamentals. The overall impact on citizens depends on how international price changes are passed onto the domestic market.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
UNSTARRED QUESTION NO. 1145
TO BE ANSWERED ON 02.12.2024
FALL IN RUPEE AGAINST DOLLAR
†1145. Shri Dinesh Chandra Yadav:
Will the Minister of FINANCE be pleased to state:
(a) the reason for the continuous fall in value of Rupee against Dollar;
(b) whether it is a fact that the major factors such as rising prices of crude oil, lack of foreign investment as well as more withdrawals of foreign investors from share market attributes towards the fall in value of rupee;
(c) whether decreasing value of rupee against U.S. dollar will increase the burden on general public; and
(d) cif so, the details thereof?
ANSWER
THE MINISTER OF STATE FOR FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) & (b): The value of the Indian Rupee (INR) is market-determined, with no target or specific level or band. Various domestic and global factors influence the exchange rate of the INR, such as the movement of the Dollar Index, trend in capital flows, level of interest rates, movement in crude prices, current account deficit etc.
During the current calendar year (CY) 2024, the INR depreciated by 1.4% till November 19, 2024 against the US dollar (USD). One of the main reasons for this depreciation of INR has been broad-based strength of the USD. During CY 2024, Dollar Index has increased by about 4.8% till November 19, 2024. More recently, the Dollar Index touched 108.07 on November 22, 2024, its highest in more than a year, exerting pressure on emerging market currencies. Further, geopolitical tensions in the Middle East and uncertainty surrounding US elections results also added to the headwiinds.
Despite this, INR remains one of the best-performing Asian currencies. In comparison, major Asian currencies like the Japanese Yen and South Korean Won declined by 8.8% and 7.5%, respectively, as on November 19, 2024. Notably, all G10 currencies, except the British Pound (GBP), depreciated by over 4.0% during CY 2024.
The relative stability of the INR bears testimony to India’s sound and resilient economic fundamentals, macroeconomic and financial stability.
(c) & (d): The depreciation of currency is likely to enhance the export competitiveness, which in turns impacts the economy positively. On the other hand, depreciation may raise the prices of imported good. The overall impact of exchange rate depreciation on domestic prices, and consequently on citizens, depends on the extent of pass through of international commodity prices to the domestic market.
