Weakening rupee will impact economy but nothing to worry about: FM

(File image of FM Nirmala Sitharaman)

The recent weakening of the rupee is expected to impact the economy but not to a degree that it becomes a worry, finance minister Nirmala Sitharaman said.

Speaking to reporters on the sidelines of an event in New Delhi on Thursday, Sitharaman said the fall in the value of the national currency, which hit a record low of 78.92 against the dollar, is being monitored by the government.

Falling value of the rupee makes imports costlier. India’s import bill hit a record high of $612 billion in FY22.

On the other hand, a weakening home currency boosts exports as shipments become more competitive and overseas buyers gain more purchasing power.

The rupee has continuously fallen in 2022 as foreign portfolio investors pulled out money from the stock and bond markets amid global uncertainties caused by the war in Ukraine.

Sitharaman said that while India's position in a globalised world opens it to external risks, the country remains better placed than other economies.

The Russian invasion of Ukraine, the subsequent global shortage of wheat, and the food crisis being faced by many nations have affected global growth, raised shipping costs and choked trade flows.

The crisis has also led to global growth estimates being slashed significantly. The United Nation's trade body reduced its economic projections for 2022 from 3.6 to 2.6 percent while the International Monetary Fund pulled back growth estimates to 3.6 percent from 4.4 percent.