Rupee exchange rate under close watch of RBI and government, says finance minister

Finance Minister Nirmala Sitharaman in Union Budget 2021-22 announced that the high level of provisioning by public sector banks of their stressed assets calls for measures to clean up the bank books. (File Image: Reuters)

The Reserve Bank of India and the government are keeping an eye on the exchange rate of the rupee, Finance Minister Nirmala Sitharaman said on July 1, after the rupee hit a fresh record low against the dollar.

“We are not alone in this world... so developments happening everywhere will have an impact on us. But the rupee against the dollar and other currencies versus the dollar, the rupee has performed relatively better,” Sitharaman told reporters in New Delhi on the sidelines of an event.

"The Reserve Bank Governor is periodically in touch with me, giving me inputs about how the Reserve Bank is monitoring the situation."

The minister said she is "very watchful and mindful" of the immediate impact the falling rupee would have in terms of making imports expensive.

The rupee slumped to a fresh record low of 79.1187 to the dollar on July 1. The unit has been falling in line with other emerging market assets as global macroeconomic woes mount.

Foreigners also continue to pull out funds from Indian equities. Rising inflation and the spike in crude oil have also hurt the rupee. Economists are concerned about a widening current account deficit.

The government earlier today raised the duty on gold to curb imports and imposed taxes on exports of petroleum products.

RBI Deputy Governor Michael Patra had said last week that the central bank will not allow any knee-jerk depreciation of the rupee.

“We don’t know where the rupee will be, even the Fed (US Federal Reserve) does not know where the dollar will be. But be sure of one thing, we will stand for its stability,” Patra had said.

The RBI does not target a level for the rupee but seeks to lower volatility in its exchange rate.