MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI NAMO NARAIN MEENA)
(a) The monthly average exchange rate value of rupee vis-a-vis US dollar during
last twelve months is given below:
Month Rupee per US dollar (month average)#
November 2012 54.78
December 2012 54.65
January 2013 54.32
February 2013 53.77
March 2013 54.40
April 2013 54.38
May 2013 55.01
June 2013 58.40
July 2013 59.78
August 2013 63.21
September 2013 63.75
October 2013 61.62
November 2013 62.63
#: RBI’s reference rate
After remaining broadly stable in the range of Rs. 53-55 per US dollar, the rupee
depreciated from June 2013 owing to outflows under the debt segment of net Foreign
Institutional Investor investment flows due to indications of a tapering of the
asset purchases by US Federal Reserve and a widening of the current account deficit
in India. On August 12, 2013 after carefully monitoring the emerging developments,
Government put in place measures to contain the current account deficit, augment
capital flows and through appropriate intervention in the foreign exchange market
by the RBI to stabilize the rupee.
(b) & (c) The impact of exchange rate depreciation on different sectors of Indian
economy depends on a number of factors like elasticity of exports and imports,
relative prices of domestic and global product etc. Theoretically, the depreciation
of a currency should boost the country’s domestic production and exports as goods
produced by domestic companies become relatively cheaper. Therefore, while the
rupee depreciation should benefit export oriented companies, though with a lag, the
same makes the imports costly for import oriented companies. However, exchange rate
is one of the several factors that determine the competitiveness of exports. The
other factors include productivity growth, technological innovations, price
elasticity, import intensity of exports, demand and supply conditions in the global
market. Rupee depreciation also increases the burden of debt in rupee terms where
borrowing is in foreign currency. In situations where the higher cost is passed
on to the consumers, it would also contribute to inflationary pressures and general
price rise. A number of measures have been taken by the Government to contain the
current account deficit (CAD), boost capital flows in order to reduce volatility in
the currency market and stabilize the rupee. These, inter alia, include compression
in import of gold and silver and non essential items including hike in custom
tariffs and administrative measures, public sector financial institutions to raise
quasi-sovereign bonds to finance long term infrastructure, liberalizing ECB
guidelines, PSU oil companies to raise additional funds through ECBs and trade
finance, and liberalizing NRE/FCNR deposit schemes, RBI’s intervention in the
foreign exchange market, and liberalizing FDI. Besides, a number of export
promotion schemes are in place to promote exports and certain additional features
have been made like widening of Interest Subvention Scheme and raising the rate of
subvention from 2 per cent to 3 per cent, broadening the scope of Focus Market
Scheme, Focus Product Scheme and Incremental Export Incentivisation Scheme etc..
As a result of these measures CAD has come down significantly from US$ 21.8 billion
in the first quarter of 2013-14 to a level of US$ 5.2 billion in the second quarter
of 2013-14 and the exchange rate of the rupee has stabilized
