CEA supports gradual short-term fall in rupee

"We should in the short-run allow the rupee to depreciate gradually and we should use foreign exchange reserves judiciously, keeping the firepower for 2023 as well," he said at an online Indian Chamber of Commerce event.

Presently, USD jumped to Rs 82 from Rs 74.5 which was seen at the beginning of this year, as per media reports.

Except for the fall in the local unit, the forex reserves also witnessed an over two year low.

The forex reserves had been reduced to its lowest levels since July, 2020 to USD 524.52 bln for the week ending Oct. 21, as per an ET report.

India's CEA also brought attention to the fact that interest rates difference between the US and the south Asian nation has reduced, leading to booking profits and repatriation of capital by foreign investors.

Narrowing down to Inflation as an obstacle, he said the gap between reality and inflation targets is less for India compared to much more advanced nations, however, trade deficit will be a crucial challenge to surpass.

"India has a trade deficit because we import a lot of crude oil. We also continue to import consumption goods. We have also imposed export restrictions on food grains, sugar and iron ore. That is also holding back our export revenues.

"So, financing the trade deficit is an important challenge this year," he added.

The fifth largest economy in the world is in a stable economic situation and sees good growth momentum despite the current global economic situation, Nageswaran said.

"India will have a growth rate of 6.5 percent to seven percent in 2022-23," he said.

The inflation rate stands at 7.4 percent, as per media reports.

On Monday, the rupee rose by 43 paise and closed at 81.92 against the USD due to a weak greenback abroad and consistent inpour of foreign funds.