INR still best performing Asian currency; rupee fall may aid export competitiveness: Fin Min

The Indian rupee on December 2 hit a fresh record low against the US dollar after data revealed a sharp slowdown in economic growth.

While, the depreciation of rupee is likely to enhance India's export competitiveness, which in turns impacts the economy positively, it may also raise the prices of imported goods, the Minister of State for Finance Pankaj Chaudhary said in a written response in the Lok Sabha on December 2.

"The overall impact of exchange rate depreciation on domestic prices, and consequently on citizens, depends on the extent of pass through of international commodity prices to the domestic market," Chaudhary added.

During the current calendar year 2024, the INR has depreciated by 1.4 percent till November 19, 2024 against the US dollar (USD).

Chaudhary said that despite the recent fall, INR remains one of the best-performing Asian currencies.

In comparison, major Asian currencies like the Japanese Yen and South Korean Won declined by 8.8 percent and 7.5 percent, respectively, as on November 19, 2024. Notably, all G10 currencies, except the British Pound (GBP), depreciated by over 4.0 percent in 2024.

His reply comes amid the Indian rupee hitting a fresh record low against the US dollar on December 2.

The rupee ended at a record low of 84.70 per dollar, down 0.21 percent from its previous close of 84.50, following Friday’s government report showing the economy grew at its slowest pace in nearly two years.

One of the main reasons for this depreciation of INR has been broad-based strength of the USD. During 2024, Dollar Index has increased by about 4.8 percent till November 19, 2024 and touched its highest level in more than a year at 108.07 on November 22, 2024, thereby exerting pressure on emerging market currencies, the minister of state said.

Further, geopolitical tensions in the Middle East and uncertainty surrounding US elections results added to the headwinds.