NEW DELHI — The recent depreciation of the Indian rupee has been influenced by a combination of domestic and global factors, including a widening trade deficit and developments related to India’s ongoing trade negotiations with the United States, the government told Parliament on Tuesday.
The rupee crossed the 90-per-dollar mark earlier this month, a historic level during the 2025–26 financial year.
In a written reply to the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said movements in the rupee are shaped by a range of factors, including global currency trends and capital flows.
“Various domestic and global factors influence the exchange rate of the Indian rupee, such as the movement of the Dollar Index, trends in capital flows, interest rate levels, crude oil prices, and the current account deficit,” Chaudhary said.
He noted that while currency depreciation can improve export competitiveness and support economic growth, it can also increase the cost of imports.
“Depreciation may raise the prices of imported goods. However, the overall impact on domestic prices depends on the extent to which international commodity prices are passed through to the domestic market,” the minister said.
Chaudhary added that import costs are influenced by multiple factors beyond exchange rates, including global supply and demand conditions, whether imports are essential or discretionary, freight costs, and the availability of substitute goods. As a result, the broader impact of currency movements on inflation and the economy cannot be viewed in isolation.
He emphasized that the rupee’s value is market-determined and that the government does not target a specific exchange rate level or band.
The Reserve Bank of India regularly monitors foreign exchange markets and intervenes to curb excessive volatility, Chaudhary said. The central bank also tracks global developments that could affect the dollar-rupee exchange rate, including monetary policy decisions by major central banks, key economic data releases, OPEC+ decisions, geopolitical developments, and daily movements in major global currencies.
To support capital inflows, Chaudhary said the government continues to promote foreign direct investment through an investor-friendly policy framework. Most sectors, except a few strategically sensitive ones, are open to 100 percent FDI under the automatic route.
More than 90 percent of FDI inflows now come through the automatic route, he said, adding that the government is working to attract further investment by easing regulations, streamlining processes, improving infrastructure and logistics, and enhancing the overall business environment. (Source: IANS)
