Amid concerns expressed by the Opposition on the weak rupee, finance minister Nirmala Sitharaman on Tuesday asserted that the domestic currency wasn’t “collapsing” but finding its natural course.
Speaking in the Rajya Sabha, the minister said the rupee has depreciated against the dollar but its performance is still better than the currencies of India’s peers.
The central bank hasn’t set any target to contain the rupee, as the currency is free to find its own course. However, the RBI has intervening in the forex market to smoothen the volatility in the rupee movement, the minister said. “We have withstood the impact of the US Fed’s decisions much better than any other peer currencies,” she told the upper house.
The domestic currency, which had depreciated for weeks to hit almost 80 per dollar last month, has started inching up in recent sessions. On Tuesday, the rupee settled up at more than a month high of 78.65, having gained by 41 paise. The rupee appreciation was aided by foreign fund inflows and a recent weakening of the greenback against rivals. Easing crude oil prices, too, helped. Still, the rupee has lost about 6% against the dollar in 2022.
Responding to the suggestions offered by some MPs that the non-resident Indians should be allowed to make remittances in foreign currency, the minister said it is not for the finance ministry to give assurance on this issue; but she will pass on the suggestion to the RBI.
After nine straight months of outflows, the net fund flows from foreign portfolio investors into Indian equities turned positive in July.
To improve forex inflows and help the rupee, the central bank last month announced a raft of measures to boost foreign exchange inflows, including permitting overseas investors to buy short-term corporate debt and allowing more government securities under the fully accessible route. It doubled the external commercial borrowing limit under the automatic route to $1.5 billion, among others.
Responding to the Opposition’s criticism that the Centre has been using the cess route to corner a large chunk of funds, thus depriving states of their legitimate revenue share, the minister said the minister said the Centre has been spending more through the states and for them through various schemes than what it collects via cess. Also, if there is a gap between the cess collected and the fund requirements, the Centre fills it, she added. Cesses are not part of the divisible tax pool that is shared with states.
For instance, collected Rs 2.03 trillion in road and infrastructure cess in FY22 but ended up spending Rs 2.5 trillion (RE), according to official sources. In FY23, while the Centre expects a collection of Rs 1.38 trillion through this cess, it’s likely to spend about Rs 2.95 trillion on that account.