Rupee fell over 11% in 2022, worst since 2013; garrulous PM keeps mum

In 2022, the Indian rupee saw its worst fall in nine years as it depreciated over 11 per cent against the dollar—its poorest performance since 2013 and the worst drubbing among Asian currencies.

The rupee closed 2022 at 82.61 to the US dollar, down from 74.29 at end of 2021 as the US currency headed for its biggest yearly gain since 2015.

On January 3 (the first trading day of 2022), the rupee closed at 74.28. It slumped 98 paise on February 24, the day the Russia-Ukraine war started and since then it has been on a downslide. On October 19, the rupee breached the 83 to a greenback mark for the first time.

The opposition and the critics reminded Prime Minister Narendra Modi as to how he had slammed the Congress-led UPA government over the rupee’s depreciation and had demanded to know why the Indian currency’s performance was worse than its neighbours.

In 2022, the rupee performed the worst among Asian currencies, but Prime Minister Modi did not come forth even once to give any explanation for the same or assure the public of any measures to arrest the slide!

The volatility in the currency market during the year was triggered by the outbreak of the Russia-Ukraine war in February as it disrupted the global supply chains, fuelling inflation as well as inflationary expectations across the world.

The US Federal Reserve started raising rates to rein in inflation.

High crude oil prices in the international market too weighed on the rupee. Foreign investors pulled out a net sum of Rs 1.22 lakh crore from the Indian equity markets and over Rs 17,000 crore from the debt markets in 2022.

However, the Union finance minister Nirmala Sitharaman did come up with an explanation for Indian rupee’s dismal performance against the US dollar: rupee is not falling, it’s the dollar that is strengthening!

Following this, the social media buffs had a nice time as the FM’s brilliant retort, as well her scowl, generated a thousand memes. A brief comic relief in otherwise dismal times.

On its part, the RBI dipped into its forex reserve and spent more than a hundred billion dollars to (artificially) prop up the sliding rupee, but it didn’t help much. The rupee crossed the 83 to a dollar mark.

What lies ahead in 2023?

Falling value of the rupee has also created concerns on the Current Account Deficit (CAD) front, which coupled with widening trade deficit could put further pressure on the Indian currency going forward.

News agency PTI quoted a senior Motilal Oswal Financial Services (MOFSL) functionary as saying that they expect volatility for the rupee to continue in the coming year with central banks continuing to remain hawkish.

"We expect that the USD-INR (Spot) could trade with a positive bias and in the next quarter could quote in the range of 81.50 and 84.50," he said.

Since mid-October, the rupee recovered from the bouts of volatility experienced in the earlier part of the year and has been trading close to its long-term trend, as per the RBI's Financial Stability Report.

The rupee gained 26 paise to close at 82.61 against the US dollar in the last trading session of 2022.

But the question remains: will PM Modi speak up and present a roadmap for the rupee’s and the Indian economy’s recovery? Or, will he admit at least that he was wrong in criticising the Manmohan Singh government a decade back?

Or, are we expecting too much?

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