No targets for rupee value, it is market-determined: Sitharaman

New Delhi: The value of Indian rupee is market-determined, and there has been no devaluation, which is a feature of a fixed exchange rate regime, Finance Minister Nirmala Sitharaman said on Monday.

The rupee has been falling in recent weeks, and on Monday touched an all-time low of 87.29 against the American currency.

Various domestic and global factors influence the exchange rate of the rupee such as the movement of the Dollar Index, trends in capital flows, level of interest rates, movement in crude prices, and current account deficit.

In a written reply to the Lok Sabha, Sitharaman said there has been no “devaluation” of the Indian Rupee (INR), which is a feature of a fixed exchange rate regime.

“The value of the INR is market-determined, with no target or specific level or band,” she said.

The minister further said the depreciation of currency is likely to enhance the export competitiveness, which in turn impacts the economy positively. On the other hand, depreciation may raise the prices of imported goods.

“However, the overall impact of exchange rate depreciation on domestic prices depends on the extent of the pass-through of international commodity prices to the domestic market,” she added.

Furthermore, the imports in the economy also depend on various factors, including the demand and supply of commodities in the international market, kind of tradeable (essential or luxury items), freight costs, and availability of substitute goods.

Thus, the impact of the movement of the exchange rate on the import cost and, hence, on domestic inflation and consumer cost of living cannot be isolated, the minister said.

“The approach towards exchange rate management has remained consistent and well-articulated, in terms of which the value of the INR is market-determined, with no target or specific level or band,” Sitharaman said.