The dollar is strengthening, not the rupee is sliding, according to FM Sitharaman in the US
She said that the Indian economy’s fundamentals were sound and that inflation was low when compared to other regions of the world in a press conference after attending the annual meetings of the International Monetary Fund (IMF) and the World Bank.
In response to a query on the rupee’s decline, she remarked, “First of all, I would look at it as not rupee sliding, I would look at it as dollar strengthening, dollar strengthening incessantly.” According to her, the dollar is functioning well relative to all other currencies in the world.
“And I’m not talking about technicalities, but it is a reality that the Indian rupee has probably weathered this dollar rate going up, the exchange rate in favour of the dollar strengthening is there, and I think Indian rupee has behaved much better than many other emerging market currencies.”
The rupee reached a new record low of 82.68 against the US dollar on Monday, following which the Reserve Bank of India (RBI) is likely to have intervened. On Friday, the rupee settled at 82.35. According to some commentators, the central bank may have spent close to $100 billion USD in the previous year to support the rupee.
India’s foreign exchange reserves decreased significantly from the USD 642.45 billion observed a year ago to USD 532.87 billion in the week ending October 7. Both Sitharaman and the RBI have previously blamed changes in valuation brought on by the strengthening US currency for the drop in foreign exchange reserves.
On Saturday night, Sitharaman stated that the RBI’s measures were limited to reducing excessive volatility and that the goal of its market intervention was not to set the value of the rupee.
“I believe that the RBI is working more to maintain a certain level of… more to ensure that there isn’t too much volatility,” she remarked. “The goal is not to manipulate the rupee’s value through market intervention.
Therefore, the only activity in which RBI is engaged is limiting the volatility. I’ve said it before, but the rupee will level out on its own.
According to the finance minister, India’s inflation is at a controllable level. “The macroeconomic fundamentals and the economic fundamentals of India are both strong. The foreign currency reserve is enough. “I keep saying that inflation is also at a manageable level, and I stand by that statement,” she said.
Consumer price index (CPI) inflation in India increased to a five-month high of 7.41% in September from the previous month’s figure of 7%, with the reading maintaining for the ninth straight month well above the upper tolerance threshold of the RBI’s inflation targeting framework.
In response to inquiries, Sitharaman said she would dearly love to bring the inflation further below 6% and the government is working toward it. She also held 24 bilateral and roughly a dozen multilateral meetings on the sidelines of the IMF and World Bank meetings.
She noted that external causes are badly affecting countries and that several around the world, including Turkey, are experiencing double-digit inflation.
“Additionally, external circumstances are having an impact on us. We are affected as well. But because we take a variety of timely actions each time, we are able to at least maintain this level. At this point, bringing it to four would be ideal, but we’re trying “She spoke.
We must therefore be aware of where we stand in relation to the rest of the globe. Although I don’t want to celebrate, it is true that we are sticking together. And I’m particularly aware of the fiscal deficit.
She claimed that the administration was monitoring the widening trade deficit to see if it was increasing disproportionately towards any particular nation.
The trade gap, she claimed, was really expanding. We are importing significantly more than we are exporting because it is expanding across the board. And there is no doubt that the odds are against us. But we’re also keeping an eye out for any disproportionate increases against any particular nation.
She was responding to a query on the trade gap versus China increasing to about USD 87 billion.
India’s trade imbalance increased to USD 25.71 billion in September as imports exceeded exports by USD 61.51 billion.
“The same is true if you examine the imported goods; they tend to be more intermediates than ultimate consumer goods. Additionally, there is potential for value addition and exports when I say that we should use more raw materials and intermediate goods “added Sitharaman.Therefore, I wouldn’t want to jump to panic over this net deficit, which means that imports are significantly higher than exports, because if you carefully consider it, the type of imports that are occurring are also very important for our industrial activity and for our value addition for exports purposes.