GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF ECONOMIC AFFAIRS
UNSTARRED QUESTION NO 537
TO BE ANSWERED ON THE MARCH 4, 2008 PHALGUNA 14, 1929 (SAKA)
Appreciation of Rupee Question .
SHRI RAJEEV CHANDRASEKHAR
Will the Minister of FINANCE be pleased to state:-
(a)whether it is a fact that the rupee has appreciated almost by 15 per cent in recent times;
(b)if so, whether Government’s view on the rate of increase in rupee that is acceptable and seen as non-disruptive to the economy; and
(c)the steps proposed to be taken to ensure stability of Indian economy in the face of this rupee appreciation?
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PAWAN KUMAR BANSAL)
(a): The extent of appreciation or depreciation of the rupee vis-à-vis major currencies varies according to the time horizons as reference period (Table below)
(in per cent)
Jan 2008 over Jan 2007 (monthly average)
Jan 31, 2008 over April 03, 2007 (point-to-point)
U K Pound
(-) indicates depreciation
(b) and (c): The exchange rate of the rupee depends on the demand and supply forces in the foreign exchange market. The exchange rate policy is guided by the broad principles of careful monitoring and management of exchange rates with flexibility, without a fixed or a pre-announced target or a band, coupled with the ability to intervene as and when necessary. Excess volatility in foreign exchange markets is contained through intervention as and when necessary and followed up by sterilization of liquidity through issuance of treasury bills/dated securities under the Market Stabilization Schemes.
As capital flows in excess of the current account deficit poses challenges to monetary management, the Budget 2008-09 mentions, “The solution lies in increasing the absorptive capacity of the economy in the medium term. In the short term, it is out responsibility to manage the flows more actively, Government will, the consultation with RBI, continue to monitor the situation closely and take such temporary measures as may be necessary to moderate the capital flows consistent with the objective of monetary and financial stability”.