Rupee devaluation harmful for India’s long term interest: Goyal

Devaluation of currency to boost exports would not be in the nation’s interest in the long run, commerce and industry minister Piyush Goyal said on Wednesday. He pointed out that rupee devaluation could create inflationary pressures through costlier imports, pushing up interest cost and making products uncompetitive as India is largely import-dependent for raw materials.

Speaking at an event, the minister said that it was important for India to expand exports significantly and encourage investments to increase foreign exchange inflows into the country.

The statement comes after World Trade Organization slashed the global trade growth forecast for the year to 3% from 4.7% earlier citing the Ukraine war and covid-19 lockdowns in China. India’s exports touched a record high of $419 billion in 2021-22.

“There is a large pool of thought which believes that you need to devalue your currency so that you become competitive in the export market…I can assure you from my own experience and my engagements with large sections of the industry across the board confirm that rupee devaluation or weakening our currency is actually detrimental to our nation’s interest, to our growth story and to our ability to be competitive in the long run,” Goyal said at an event to mark the 15th Civil Services Day.

“If we can save our currency from depreciating, we can reduce interest rates, we can reduce the impact of inflation on our society, after all we have a large number of products that we are importing,” Goyal further said.

He added that healthy exports, investments and remittances help in growing foreign exchange reserves, which stand at over $600 billion. Export helps in earning precious foreign exchange and keeps the rupee stable, he noted. The minister further said exports during April 1-14 have increased to $18.5 billion

However, it must be noted that India’s imports have risen at a faster pace than its exports, widening the trade deficit. India’s trade deficit rose by 87.5% to a record ₹192 billion in 2021-22 from ₹102 billion in the previous financial year, government data showed on Monday.

The increase was primarily on account of the sharp increase in petroleum imports due to the surge in global crude oil prices.

Speaking of the recent decision to remove the import duty on cotton, the Minister clarified that the decision was made to ensure the affordability of cotton, particularly in a scenario where cotton prices stood at almost twice the Minimum Support Price, making textile exports uncompetitive.

The lower import costs will boost manufacturing, create jobs, increase the disposable income of people, boost investment, demand and economic activity and create a virtuous cycle, he added. The minister said that the government also recently removed anti-dumping duty on several raw materials for the same reasons.