The rupee fell to a low of 57.2 per US dollar in June-end on widening trade and current account deficits,Eurozone crisis and strong dollar in the overseas market,Parliament was informed today.
“The reason for decline in the value of rupee against US dollar is supply-demand imbalance in domestic foreign exchange market.
“This is due to widening of trade and current account deficits and slowdown in portfolio flows on account of escalation in euro zone crisis and strengthening of US dollar in international market due to safe haven status of US treasuries,” Finance Minister P Chidambaram said in a written reply in Rajya Sabha.
The exchange rate of the rupee touched low of 57.2 per US dollar on June 27,2012,he said.
However,the government and the RBI have taken a number of steps to facilitate capital inflows and boost exports in order to augment supply of foreign exchange to stem the decline in exchange rate of rupee,Chidambaram said.
“Recent measures taken include,hike in FII investment in debt securities (both corporate and government),enhancing all-in-cost ceiling for external commercial borrowings (ECBs) between 3-5 year maturity,higher interest rate ceiling for foreign currency Non-resident deposits,and deregulation of interest rates on rupee denominated NRI deposits.”
Also,manufacturing and infrastructure sector companies can now avail of external commercial borrowings up to a ceiling of USD 10 billion for repayment of outstanding rupee loans towards capital expenditure. Under the Annual Supplement 2012-13 to Foreign Trade Policy 2009-14,the government has announced initiatives to boost exports to about USD 360 billion in 2012-13,the minister said.
“As a result,rupee’s exchange rate recovered to 55.8 per US dollar on July 31,2012 from the low of 57.2 per US dollar on June 27,2012,” Chidambaram added further.
Also,the RBI had announced a number of measures in December last year to curb speculation by banks and corporates in forex market,he said.
In a separate reply to the house,Minister of State for Finance Namo Narain Meena said the exchange rate depreciation was one of the factors affecting the performance of Indian companies.
The country’s foreign exchange reserves declined between January-July 2012 mainly due to sale of foreign currency assets by the RBI,Meena said.
Forex reserves declined to USD 288.8 billion at the end of July,2012 from USD 292.8 billion at the end of January,2012.
“Though the foreign exchange reserve declined…the reserves are at adequate level in terms of import coverage,” he added further.