NEW DELHI: The government on Monday clarified that the recent decline in India’s foreign exchange reserves (FER) is not the highest decline in the country’s history.
Minister of State for Finance, Pankaj Chaudhary, stated in a written reply in the Lok Sabha that the reserves declined by 2.63 per cent during the week ending November 15, 2024, compared to the previous week.
While this drop has drawn attention, the Minister highlighted that it is far from being the steepest decline in percentage terms in the past two decades. The sharpest fall was recorded in the week ending October 24, 2008, when the reserves dropped by 5.65 per cent during the global financial crisis.
He said “For the week ended November 15, 2024, the Foreign Exchange Reserves (FER) decreased by 2.63 pc vis-a-vis the previous week. However, in percentage terms, the highest decline till date in the last 20 years was observed in the week ended October 24, 2008”.
The recent pressure on India’s foreign exchange reserves and the Indian Rupee (INR) is attributed to various external and domestic factors.
These include capital outflows, fluctuations in the dollar index, rising global interest rates, and increasing crude oil prices. Together, these factors have created a challenging environment for the Indian currency.
The government also emphasized that the value of the Indian Rupee is determined by market forces without any fixed target or band.
It says that several factors influence the exchange rate, such as capital flows, the dollar index, interest rate levels, crude oil prices, and the current account deficit.
The minister said, “The value of the Indian Rupee (INR) is market-determined, with no target or specific level or band”.
The Reserve Bank of India (RBI) also plays a critical role by intervening in the forex market when necessary to curb excessive volatility in the rupee’s value.
The government’s statement reassures that the situation is under control, with the RBI and other mechanisms in place to address undue fluctuations and maintain financial stability. (ANI)