Finance Minister Nirmala Sitharaman on Wednesday attributed the weakening of the rupee against the US dollar to a mix of global and domestic factors. Replying to the general discussion on the Union Budget in Lok Sabha, the Finance Minister addressed a host of issues, underlining that the Budget has come at a time of immense uncertainties and has been challenging in the context of global macroeconomic environment.
“The world scenario in the last ten years has turned 180 degrees, and making the Budget is more challenging now than ever before,” she said, adding that the Budget balances national development necessities with fiscal priorities.
The FM said that various domestic and global factors influence rupee movement such as movement of dollar index, level of capital flows, level of interest rates, movement in crude prices and that the current volatility across major countries is extensive.
She said even former RBI Governor Raghuram Rajan, acknowledged on January 15, 2025, that fixation is always with the rupee-dollar exchange rate and the reality is that the dollar has been strengthening against many currencies including the Euro. “So it is really a dollar issue,” she said.
The Indian Rupee has depreciated 3.3 per cent against the US dollar between October, 2024, and January, 2025, but the decline has been lower than that in some of its Asian peers. South Korean Won and Indonesian Rupiah depreciated 8.1 per cent and 6.9 per cent respectively during this period.
Responding to the issue on capital expenditure, she said that the effective capital expenditure in FY26 is ₹15.48 lakh crore, which is 4.3 per cent of GDP. The fiscal deficit target is 4.4 per cent of the GDP for next fiscal. “It indicates that the government is using almost the entire borrowed resources for financing effective capital expenditure. So the borrowings are not going for revenue expenditure or committed expenditure…,” she said while adding that it’s going only for creating capital assets
The FM said that food inflation, which was impacted by adverse weather conditions or supply chain disruptions, has been attended to and now appears to be moderating. “Inflation management receives the highest priority of this government. Overall, retail inflation is within the notified tolerance band of 2-6 per cent,” Sitharaman said.
Sitharaman also said there has been no cut in transfer to states and ₹25.01 lakh crore will be transferred in FY26.