BENGALURU: Finance Minister Nirmala Sitharaman on Sunday said India remained the world's fastest-growing economy, but uncertainty in West Asia and the country's import dependence on three major commodities have weakened the rupee against the dollar.
RBI Intervention and Forex Reserves
"Whenever there is severe fluctuation or volatility in the rupee versus the dollar, the RBI intervenes in the market. It is not to fix a price but to stop the slide and stabilise it. For this purpose, forex reserves are used. Furthermore, on account of the increased number of foreign institutional investors (FII) and foreign direct investments (FDI) booking profits and exiting the country due to strategic investments developing in the US, our reserves are coming down. This is causing the fluctuation," Sitharaman said.
Global Currency Pressure
She added that it is not only the rupee that is under pressure, as currencies such as the Japanese Yen and the Korean Won have also fallen sharply against the dollar.
Key Factors Behind Rupee Weakness
The minister highlighted that the more significant challenge is persistent uncertainty in West Asia, while imports of crude oil, gas, fertilisers, and gold are also pushing up dollar demand. "With crude and gas not being produced in India and limited internal supply of fertilisers and gold, there is a huge amount of money that has to be paid in forex, which is adding to the rupee versus dollar situation," she said.
Fertiliser Subsidy
She also noted that India is buying fertiliser at about Rs 3,000 per bag and selling it to farmers at Rs 300, implying a subsidy of roughly Rs 2,700 to Rs 2,800 per bag.
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