FM Sitharaman: Rupee-Dollar Fluctuations Influenced by Global and Domestic Factors
Union Finance Minister Nirmala Sitharaman stated on Sunday that the fluctuations of the Indian rupee against the US dollar are driven by both global and domestic factors. She emphasized that the Reserve Bank of India (RBI) intervenes in the currency market solely to manage excessive volatility, rather than to maintain a specific exchange rate. Sitharaman made these remarks during an event in Devanahalli, near Bengaluru, commemorating 12 years of the Narendra Modi-led NDA government.
Factors Influencing the Rupee
Sitharaman explained that the rupee’s value is influenced by various elements, including US monetary policy, foreign capital flows, and currency movements in other nations. She noted that external uncertainties, such as the US Federal Reserve’s interest rate decisions and the depreciation of currencies like the Japanese yen and Korean won, contribute to the rupee’s fluctuations. Additionally, she highlighted that foreign institutional and direct investors reallocating funds in response to developments in the US can impact India’s reserves and currency stability.
The finance minister pointed out that India’s reliance on imports of crude oil, fertilizers, and gold necessitates significant dollar payments, making effective foreign exchange management crucial. She cited the government’s fertilizer subsidy program, revealing that the cost of a fertilizer bag has surged from Rs 300 to Rs 3,000 post-COVID, resulting in a subsidy of approximately Rs 2,700 per bag for farmers.
India’s Economic Growth
Sitharaman asserted that India continues to be recognized as the fastest-growing major economy, according to official data and assessments from international institutions. She noted that growth has been observed across all sectors, including manufacturing, agriculture, services, logistics, and transport. Furthermore, she mentioned that unemployment rates are declining based on official surveys, and highlighted government initiatives aimed at internships, skill development, and AI-based training.
Karnataka Funding Dispute
In response to claims from the Karnataka government regarding the non-release of its due share of funds, Sitharaman clarified that fund allocations are determined by the Finance Commission, not the Union government. She explained that the Finance Commission assesses states based on specific metrics and that the central government is obligated to adhere to these allocations for a five-year period.
Sitharaman rejected the notion that states should receive back all the taxes they contribute, stating that such a principle is not feasible. She urged the Karnataka government to ensure adequate fiscal resources before making welfare commitments and encouraged the state to utilize central budget provisions for cold storage and warehousing projects through Farmer Producer Organisations, noting that no proposals had been submitted from Karnataka thus far.
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