Union Finance Minister Nirmala Sitharaman on Sunday said that the rupee’s movements against the US dollar are affected by a mix of global and domestic factors, stressing that the RBI only intervenes to contain excessive volatility and not to defend any specific exchange rate.Speaking to reporters at Devanahalli near Bengaluru during an event marking 12 years of the Narendra Modi-led NDA government, Sitharaman said currency markets are affected by global developments ranging from US monetary policy to movements of major international currencies, news agency PTI reported.“Whenever there is volatility or extreme volatility, the Reserve Bank intervenes in the market to not set the price.
Just to stop any kind of fluctuations. The Reserve Bank comes into the picture, stabilizes it, and then goes out, using foreign exchange from the reserve. “So she does it sparingly,” she said.
What is the impact of the rupee?
The Finance Minister said that decisions taken by the US Federal Reserve, foreign capital inflows and currency movements in other economies all play a role in determining the course of the rupee.“The rupee and its fluctuations are due to various factors: uncertainty abroad, the US Federal Reserve’s talk of increasing or lowering interest rates in their country, the collapse of the Japanese yen against the dollar, and the collapse of the Korean won.
She added: “Therefore, there are several reasons that determine the exchange rate between countries and currencies.”Foreign institutional and direct investors booking profits and reallocating funds due to developments in the US could also impact reserves and currency movements, Sitharaman added.India’s dependence on imports of crude oil, fertilizers and gold requires large disbursements in dollars, making foreign exchange management an important task, she said.Highlighting the government’s fertilizer subsidy programme, she said: “Since the time of Covid, we have been giving a bag at Rs 300. After Covid, when we imported it from foreign countries, the same quantity, one bag, reached Rs 3,000, which means per farmer, per bag, we are giving between Rs 2,700 as subsidy.”
FM says fastest growing major economy
Sitharaman said that official data and assessments by international institutions continue to show India as the fastest growing major economy.“For the past five-six years, India has been the fastest growing economy. This year, when the GDP numbers came out, every sector, from manufacturing to agriculture, services, logistics and transportation, showed significant growth,” she said.Regarding employment, she said that unemployment levels are declining according to official surveys and highlighted initiatives focusing on internships, skills development and artificial intelligence-based training.
Karnataka Finance Describe
Responding to the Karnataka government’s allegations that the Center has not released the state’s due share of funds, Sitharaman said the allocation is determined by the Finance Commission and not the Union government.“Who sets this principle? Not Prime Minister Modi, not the government of India. There is a finance committee that goes around all the states and decides on the basis of some parameters. Once the decision is taken, for the next five years, whatever happens, the central government will have to pay the state,” she said.“If Bengaluru and Karnataka contribute and I need to recover all the money, the principle does not work that way,” she added, rejecting arguments that states should recover all the taxes they contribute.Regarding state welfare guarantees, Sitharaman said governments must ensure adequate financial resources before making commitments.“If your budget has such resources to give, mention it in the budget, discuss it in the assembly and please give it. But don’t give if you don’t have money and then blame the Center saying, ‘The Center is not giving me money,'” she said.It also urged Karnataka to utilize central budgetary allocations for cold storage and warehousing projects through farmer-producer organisations, saying no proposals have been received from the state so far.