Ans27.) Rupee has depreciated by more than 12% against dollar in last 18 months and govt and RBI have taken multiple steps to control it.
The reasons for depreciation are
- Correction of REER which had been overvalued for very long.
- Pressure on current account due to US IRAN war which has kept crude oil at higher price
- Outflow of fpi consistently for two years, going beyond 30 billion.
- Net fdi has dropped significantly in last three years to below $10 billion, compared to being above $20 billion before that.
- Rise in fertilizer import bill and poor monsoon expectations play a role in creating further expectations of depreciation.
Govt and RBI has taken following steps to control it
- Swap of dollar and rupee in December 2025 to create more supply of dollars by RBI
- Purchase of rupee denominated bonds to make them more attractive
- RBI has also increased the limit of investment for fpi in Indian firms to 15% for individual fpi and 24% for cumulative investments in June 2026
- Allowing banks to raise money through FCNR(B) account at concessional rate by bearing their hedging cost by RBI. RBI has also allowed inflow of deposits in banks through OCI and ECB routes.
-Govt removed the withholding tax of 20% on interest and capital gains tax on fpi for investment in govt bonds.
- FPI is allowed to invest in Indian govt bonds of 15,30 & 40 years duration through FAR, which was earlier not allowed.
- Increasing import duty on gold and silver to curb their imports.
Thus the steps have resulted in stabilizing rupee value and it has remained stable for last 3 months. The inflow of dollar of more than $50 billion has also helped in strengthening investor's confidence and in July and August FPI has remained a positive net investor in India in equity market too.
Thus Indian economy should continue with internal reforms to improve its position on current account and also to maintain macro economic stability which will keep it attractive on capital account.
August 19, 2026 10.1K 54
