Nirmala Sitharaman: RBI trying to curb rupee volatility, not fix its value; fiscal discipline should not worry investors
Finance Minister Nirmala Sitharaman said on 13 October that while the Reserve Bank of India (RBI) would continue its efforts to curb volatility in the rupee but is not seeking to fix its value, as the currency faces pressure from external factors.
“The RBI is not trying to fix the rupee; it is trying to stop the volatility,” Sitharaman said, adding that the central bank’s measures would continue to ensure stability in the currency market."
Sitharaman was speaking at the Bloomberg New Economy Forum in the national capital. The forum is being organized by Bloomberg Media Group, a division of Bloomberg LP, the parent company of Bloomberg News.
Referring to the RBI’s latest measures, announced two days earlier, the finance minister said the rupee had held firm and had probably appreciated. “These efforts from the RBI would continue. As I said, not to fix the rupee. We would appreciate if the rupee finds its own level,” she said.
The rupee appreciated 82 paise to 94.96 against US dollar in early trade on Tuesday, supported by various RBI measures aimed at reducing immediate dollar demand and curbing excessive positions in the foreign exchange market, news agencies said.
Forex traders said measures including a dedicated dollar window for oil marketing companies through designated banks and higher costs for certain foreign exchange hedging transactions, are expected to reduce dollar demand in the spot market and curb speculative positions against the rupee.
At the interbank foreign exchange market, the rupee opened at 95.53, then gained ground to touch 94.96, registering again of 82 paise over its previous close.
On Monday, the rupee appreciated 93 paise, logging its steepest single-day gain in more than six months, to close at 95.78 against the US dollar.
"With the RBI's measures supporting the rupee, we expect USD/INR to move towards 95.00–94.80 range in the near term," CR Forex Advisors MD Amit Pabari said.
The RBI on Saturday tightened rules governing forex derivatives trades to curtail speculative bets against the rupee and asked banks to create a 20 per cent reserve for dollar purchases of over USD 2 million.
In another set of measures announced on Saturday on the derivatives front, the RBI said authorised dealers (AD) should not permit users to rebook any foreign exchange derivative contract involving the INR, whether deliverable or non-deliverable, which has been cancelled.
The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading lower by 0.15 per cent at 102.43
Addressing concerns over capital outflows amid the rupee’s depreciation, Sitharaman said the currency’s decline over the past one-and-a-half years had been significant and was attributable to several factors, most of them external.
“I believe most of it is because of the challenges from outside,” she said, adding that the government was working to ensure that India’s macroeconomic fundamentals remained sound.
The finance minister said the RBI would continue to address fluctuations in the rupee’s value against the US dollar, which she identified as a key challenge.
Sitharaman's remarks come amid concerns over the rupee’s depreciation, capital outflows and the impact of external economic pressures on the Indian currency. The finance minister maintained that while the government would safeguard the country’s macroeconomic fundamentals, the RBI’s intervention was aimed at managing excessive volatility rather than defending a fixed exchange-rate level.
Brent crude, the global oil benchmark, was trading lower by 1.11 per cent at USD 105.47 per barrel in futures trade. On the domestic equity market front, Sensex climbed 305 points to 72,224.15, while the Nifty was up 93.40 points to 22,458.50.
Foreign Institutional Investors (FIIs) offload ed equities worth ₹1,708.48 crore on a net basis on Monday, according to exchange data.
On the macroeconomic front, retail inflation in the country rose sharply to 5.54 per cent in September on the back of high onion and other food prices, remaining just within the RBI's tolerance band, government data released on Monday showed.
The consumer price index (CPI) based headline inflation was 4.83 per cent in August, according to the National Statistics Office (NSO).
Sitharaman also defended Union government’s commitment to fiscal prudence, saying fiscal deficit management remained a priority for Prime Minister Narendra Modi.
“Fiscal deficit is something very close to PM Modi’s heart. He has maintained fiscal prudence even as the chief minister,” she said adding that the prime minister had remained committed to fiscal discipline without compromising spending on health and education.
“The RBI is not trying to fix the rupee; it is trying to stop the volatility.”
“Fiscal discipline is not going to be a matter which should worry investors,” Sitharaman said.
(With agency inputs)
Gulam Jeelani is Political Desk Editor at LiveMint with over 16 years of experience covering national and international politics. Based in New Delhi, Jeelani delivers impactful political narratives through breaking stories, in-depth interviews, and analytical pieces at LiveMint since February 2024. The expertise in video production fuels his current responsibilities, which include curating content and conducting video interviews for an expanding digital audience.<br><br> Jeelani also travels during elections and key political events and has covered assembly elections in key states apart from national elections. He has previously worked with The Pioneer, Network18, India Today, News9Plus and Hindustan Times.<br><br> Jeelani’s tenure at LiveMint and previous experience at print and digital newsrooms have honed his skills in creating compelling text and video stories, explainers, and analysis that resonate with a diverse viewership.<br><br> Before moving to New Delhi in 2015, Jeelani was based in Uttar Pradesh, where he worked for five years as a reporter. In 2018, Jeelani was one of the two Indian journalists selected for the Alfred Friendly Fellowship in the US. There, he attended training workshops on reporting and data journalism, and he was attached to the Minneapolis Star Tribune in Minnesota, where he worked as a reporter.<br><br> Jeelani is a Bachelor's in Chemistry and holds a Masters Degree in journalism and mass communication from Aligarh Muslim University. Outside work, he enjoys poetry, cricket and movies.
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