Union Finance Minister Nirmala Sitharaman stated on Sunday that the rupee's movements against the US dollar are influenced by a combination of global and domestic factors. She emphasized that the Reserve Bank of India (RBI) intervenes only to curb excessive volatility and not to defend any specific exchange rate.
Speaking to reporters in Devanahalli near Bengaluru during an event marking 12 years of the Narendra Modi-led NDA government, Sitharaman noted that currency markets are affected by global developments, ranging from US monetary policy to movements in major international currencies.
"Whenever there is severe fluctuation or volatility, the Reserve Bank intervenes in the market not to fix a price. Only to stop any kind of fluctuation. The Reserve Bank comes into the picture, stabilizes it, and comes out, for which it uses foreign exchange from the Reserve. So it does it sparingly," she said.
What impacts the rupee
The finance minister explained that decisions by the US Federal Reserve, foreign capital flows, and currency movements in other economies all play a role in determining the rupee's trajectory.
"The rupee and its fluctuations are because of various factors: uncertainties outside, the US Fed talking about increasing or decreasing interest rates in their country, the Japanese yen crashing against the dollar, and the Korean won crashing. So there are several reasons which determine the exchange rate between countries and currencies," she said.
Sitharaman added that foreign institutional and direct investors booking profits and reallocating funds due to developments in the US can also influence reserves and currency movements.
She highlighted India's dependence on imports of crude oil, fertilizers, and gold, which require substantial dollar payments, making foreign exchange management an important task.
Regarding the government's fertilizer subsidy program, she said, "Since the time of Covid, we have been giving a bag at Rs 300. After Covid, when we imported it from foreign countries, the same quantity, which is one bag, touched Rs 3,000, which means per farmer, per bag, we are giving anywhere between Rs 2,700 as subsidy."
Fastest-growing major economy, says FM
Sitharaman said official data and assessments by international institutions continue to show India as the fastest-growing major economy.
"Repeatedly last five, six years, India is the fastest-growing economy. And this year, when the GDP numbers came, every sector right from manufacturing to agriculture, service, logistics, transport, every sector has shown substantial growth," she said.
On employment, she said unemployment levels were declining according to official surveys and highlighted initiatives focused on internships, skill development, and AI-based training.
Karnataka funding row
Responding to allegations by the Karnataka government that the Centre was not releasing the state's due share of funds, Sitharaman said allocations are determined by the Finance Commission and not by the Union government.
"Who sets the principle? Not PM Modi, not Government of India. There is a Finance Commission which goes around all states and decides on the basis of some metrics. That once decided, for the next five years, come what may, the central government will have to pay the state," she said.
Rejecting arguments that states should receive back all the taxes they contribute, she added: "If Bengaluru, Karnataka contribute and I need to get all the money back, the principle doesn't work like that."
On state welfare guarantees, Sitharaman said governments should ensure adequate fiscal resources before making commitments.
"If your budget has such resources to give, state it in the budget, discuss in the Assembly, and please give. But don't give if you don't have the money and then blame the Centre saying, the Centre is not giving me money," she said.
She also urged Karnataka to utilize central budget provisions for cold storage and warehousing projects through Farmer Producer Organizations, stating that no proposals had been received from the state so far.
