One of the best Asian currencies so far in 2024 has been India's Rupee, and this is still keeping up its head against Middle Eastern geopolitical tensions and the resultant global economic uncertainty. Minister of State for Finance, Pankaj Chaudhary, shared this during a written response in the Lok Sabha, attributing the Rupee's resilience to India’s robust economic fundamentals.

The Minister clarified that the Rupee's value is market-driven and not pegged to any particular target or level. As of November 19, 2024, the Rupee had slipped 1.4% against the US Dollar, primarily influenced by the Dollar's global strength.

"During CY 2024, the Dollar Index rose by approximately 4.8%, touching a 13-month high of 108.07 on November 22, 2024, which has pressured emerging market currencies," Chaudhary said.

Geopolitical instability in the Middle East and uncertainty surrounding the US elections only added to the challenges for the Rupee. However, even under these pressures, INR remains one of the best-performing Asian currencies, according to Chaudhary.

Compared to other major Asian currencies, the Rupee has fared remarkably well, up 8.8% compared to the Japanese Yen and down 7.5% compared to the South Korean Won. Most G10 currencies, except for the British Pound, have fallen more than 4% so far this year.

A weaker Rupee increases the cost of imports but boosts export competitiveness, which could positively affect the economy. The overall impact on domestic prices depends on how much of the rise in international commodity prices is passed through to local markets.

The Reserve Bank of India (RBI) regularly tracks the global events that affect the USD-INR exchange rate, including major central banks' monetary policies, key economic indicators, decisions by OPEC+, and geopolitics. The RBI resorts to intervention only to restrict undue volatility and maintain orderly operation in the forex market.

As for prudent financial management, the central government has set a goal to reduce the fiscal deficit to below 4.5% of GDP in FY26. Chaudhary said that the finance ministry continuously assesses how such a fiscal deficit impacts the economy with sufficient funds for welfare and developmental initiatives.

In foreign direct investment (FDI), Chaudhary pointed out that inflows have declined to a great extent. It came down from $43 billion in 2019-20 to $10.1 billion in 2023-24. FDI inflows are influenced by factors such as macroeconomic stability, global investment climates, central bank rates, and regulatory policies.