Finance Minister Nirmala Sitharaman, on Monday, asserted that the country’s forex reserves are only piling up and there is good measure of inflows through both FDI and FPI route in recent weeks despite the RBI’s intervention in the forex market to stem the volatility in rupee-US dollar movements.

She also made it clear that rupee — which has been strong against every other currency — had seen a fall only against the US dollar, primarily due to the strengthening of greenback on the back of US Fed’s monetary tightening policies, in recent months. 

Describing India as the fastest-growing large economy, Sitharaman told the Lok Sabha during question hour that the Reserve Bank of India (RBI) has used foreign exchange reserves to intervene in the market to only make sure that the dollar-rupee fluctuation does not go too much. “Foreign exchange reserves to some extent was used by the RBI. Too much volatility would have otherwise led to other consequences. But in last couple of weeks, there is more reserves rising up due to flow of FDI and FII. The fact remains that our reserves are also going up”.

She, therefore, noted that it would be inappropriate to come to any conclusion that reserves are seeing a steep fall or people or investors are running away from India. “That is absolutely not proven by data. Have a good look at data to see how FDI is coming into India in a big way. Among all emerging markets, India receives more than 50 per cent of everything that goes to emerging markets,” said Sitharaman.

Sitharaman said it is sad that some people in Parliament are “jealous of the country’s economic growth”. India is the fastest-growing large economy but the opposition has a problem with it, she said. “Everyone should be proud of India’s growth but some people take it as a joke,” she said while taking a gibe at the opposition.

Sitharaman was replying to a question raised in Lok Sabha by Congress MP Anumula Revanth Reddy over currency devaluation and foreign exchange reserves.

She highlighted that India does not adopt a fixed exchange rate system and that the value of local currency (INR) is market determined. 

Rupee performance

Meanwhile, in a written reply to this question, Sitharaman said, “As global spillovers from geo-political tensions and aggressive monetary policy tightening across the world intensified alongside a surge in crude oil prices, the US dollar strengthened by 7.8 per cent in the financial year (till November 30, 2022). The INR depreciated by 6.9 per cent in the current financial year (till November 30, 2022). It has performed better than most Asian peer currencies, including the Chinese Renminbi (10.6 per cent), Indonesian Rupiah (8.7 per cent), Philippine Peso (8.5 per cent), South Korean Won (8.1 per cent), Taiwanese Dollar (7.3 per cent) during the financial year”.

The rupee on Monday declined 35 paise to 82.63 against the US dollar in early trade as heavy selling pressure in domestic equities and a strong greenback in the overseas market weighed on investor sentiments.

India’s foreign exchange reserves rose $11.02 billion during the week ended December 2 as the central bank accumulated nearly $8 billion that flowed through companies’ ECB as well as portfolio flows. Foreign exchange reserves including gold and SDR amounted to $561.16 billion as of December 2, up $11.02 billion over the previous week’s level.

At the current levels, reserves are adequate enough to cover around nine months of projected imports for 2022-23. The latest level are still about $81 billion less than the peak of $642 billion as of September 2021.