Government Highlights Strong Economy As RBI Manages Rupee Volatility

New Delhi, Jul 22 (KNN) The government has said the value of the Indian rupee is determined by market forces and that the country's macroeconomic fundamentals remain strong despite global uncertainties.

Replying to a question in the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said the rupee's movement is influenced by several domestic and global factors, including the US Dollar Index, capital flows, interest rates, crude oil prices and the current account deficit.

He said India's economy has recorded real GDP growth of over 7 percent during the past three years, supported by robust domestic demand, healthy corporate balance sheets and prudent fiscal management. High-frequency indicators for the first quarter of 2026-27 also point to continued economic resilience.

RBI Monitors Volatility, Takes Measures To Boost Forex Inflows

The minister said the Reserve Bank of India (RBI) does not target any specific exchange rate or trading band for the rupee but intervenes in the foreign exchange market to address excessive volatility.

The RBI also monitors global developments, including monetary policy decisions by major central banks, global economic data, OPEC+ decisions and geopolitical events that could influence the USD-INR exchange rate.

To support foreign exchange inflows and ease depreciation pressures on the rupee, the RBI has introduced several measures.

These include changes to the External Commercial Borrowing (ECB) framework in February 2026 by expanding the pool of eligible borrowers and lenders, relaxing borrowing conditions and simplifying reporting requirements.

In June 2026, the RBI also expanded the Fully Accessible Route (FAR) for foreign investment in government securities, eased investment norms for non-resident investors and introduced a swap facility for fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits until October 16, 2026.

They also announced concessional foreign exchange swap facilities for public sector borrowings and authorised dealer banks until January 15, 2027.

The RBI has also restored the export realisation period to nine months from the earlier 15-month window. In addition, India has signed Local Currency Arrangement agreements with the UAE, Indonesia, Maldives and Mauritius to facilitate trade in local currencies.

External Debt Indicators Remain Comfortable

The government said India's external debt stood at USD 762.8 billion as of March 2026, compared with USD 736.4 billion a year earlier.

It added that the country's external debt remains sustainable, with the debt service ratio improving from 6.6 percent at the end of March 2025 to 5.8 percent by March 2026.

India's foreign exchange reserves stood at USD 671.6 billion as of June 12, 2026, providing an import cover of 10.3 months and covering 88 percent of the country's outstanding external debt, the minister said.

(KNN Bureau)