The Reserve Bank of India (RBI) was a net seller of over $36 billion in the foreign exchange market between June and December 2024 in an attempt to stabilise the rupee, according to a written response by the government in the Rajya Sabha on Tuesday. Despite these efforts, the currency continued to weaken amid global uncertainties.
The RBI, which sold over $53 billion and purchased about $16.5 billion during the seven-month period, continues to monitor global developments affecting the exchange rate.
The depreciation of the rupee is expected to improve export competitiveness, but it may also raise import costs. The overall impact on domestic prices depends on how much international price fluctuations are passed on to consumers. Industries reliant on imported raw materials could face cost pressures.
The government said the rupee remains market-driven, with no specific target or range. The central bank tracks central bank policies, geopolitical events, and commodity price movements to assess their impact on the currency.
The reasons
Foreign portfolio investment (FPI) outflows of approximately $20 billion between October 1, 2024, and January 30, 2025, added to the rupee’s depreciation. The trade deficit of $31.8 billion in November 2024 further exerted downward pressure. Meanwhile, the interest rate differential between India and the US narrowed, as the US 10-year yield rose by 74 basis points, while India’s 10-year bond yield remained largely stable.
Global currency movements also played a role. The US Dollar Index surged 7% between October and January, causing depreciation across major Asian and G-10 currencies. The Indian Rupee weakened by 3.3% in this period, while the South Korean Won and Indonesian Rupiah recorded steeper declines of 8.1% and 6.9%, respectively. The Euro and British Pound depreciated by 6.7% and 7.2%, respectively.
