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The Rupee's depreciation against the US dollar will pose a risk to inflation but at the same time will make the exports competitive, Finance Secretary Tuhin Kanta Pandey said Tuesday.
"The Rupee is in a free-flow system. Both the government and RBI are monitoring the situation. The falling rupee will also add to export competitiveness," he said, speaking at a post-budget event organized by industry body ASSOCHAM. In the same breath, Pandey said that RBI will need to take a call on the level of the rupee. "Depreciation will pose a risk to inflation, but falling rupee will also add to export competitiveness, RBI will need to take a call on the level." The Indian rupee has been steeply depreciating for the past few weeks. It fell to a record low of 87.29 per dollar on Monday, weighed down by concerns over trade tariffs imposed by US President Donald Trump and global market uncertainties. The rupee has already depreciated more than 1.5 per cent this year, and the latest decline is seen as a reaction to tariff measures imposed by the US government. The RBI has been aggressively intervening in the market to see an orderly depreciation in the rupee. This is reflected in the latest decline in foreign exchange reserves. The reserves have been falling ever since they touched an all-time high of USD 704.89 billion in September, and they are now about 10 per cent lower than the peak. The RBI closely monitors foreign exchange markets, intervening only to maintain orderly market conditions and curb excessive volatility in the Rupee exchange rate, without adhering to any fixed target level or range. The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI has strategically bought dollars when the Rupee is strong and sold when it weakens, enhancing the appeal of Indian assets to investors. Earlier, Pandey had on Tuesday said Budget 2025 prioritised non-inflationary growth through careful fiscal management, with the government's entire borrowing of Rs 15.68 lakh crores channelled exclusively into capital expenditure. Pandey yesterday emphasized that the budget's design ensures growth without stoking inflation pressures. This approach marks a significant shift from traditional patterns where government borrowing often funded revenue expenditure, he had said. (ANI)
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