Economic Survey Blames US Fed for Weakening of Rupee
Chief Economic Advisor V Anantha Nageswaran Image credit Ministry of Finance
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By Raisina Correspondent
New Delhi, January 31: The Economic Survey has blamed the change in policy stance by the US Federal Reserve for weakening of the rupee. The Indian currency has been sharply depreciating in recent months amid flight of capital.
“Recent strength in the US dollar and rethinking in the Federal Reserve about the path of policy rates in America have caused emerging market currencies to weaken,” the Economic Survey stated in its report on the state of the economy.
Rupee continues to be weak. One dollar now is worth ₹86.63 now. The sharp depreciation of rupee also came amid the selloff by the foreign institutional investors (FIIs) in the Indian equity market.
“The Index of Global Economic Activity of the Federal Reserve Bank of Dallas has been volatile since the pandemic began slowing at the end of 2023,” added the Economic Survey 2024-25.
Union Minister for Finance Nirmala Sitharaman tabled the Economic Survey in parliament on Friday. She will be unveiling the Union Budget on Saturday.
US Federal Reserve Chairman Jerome Powell this week said that there is an uncertainty on the path of policy rates due to lack of clarity on economic vision of President Donald Trump.
US Federal Reserve left the policy rates unchanged this week. Unlike the earlier expectations of more rate cuts, the US Fed in its commentary is now sounding hawkish.
Experts state that the US Fed decision to not cut rate per expectations has constrained the Central banks in emerging countries also to not cut rates.
The Economic Survey 2024-25 also reasoned that the global state of economy remains volatile. “Europe faces both political and economic uncertainties. Europe’s biggest economic engine, Germany, experienced economic contraction for two successive years,” said the Economic Survey 2024-25.
The economic policy document also reasoned that the “political uncertainty, too, is a factor since elections are due to be held in February this year (in Germany). France has had political uncertainty due to developments in the wake of the snap elections called there.
“The United Kingdom had a change of government. After a long gap, the Labour Party came into office amidst fiscal pressures and a slowing economy,” added the Economic Survey.
It also stated that “Europe, in general, is facing competitiveness pressures amidst much higher energy costs caused, in part, by the transition towards renewable energy. To a large extent, these developments have affected the global economy.”
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