Finance Minister Nirmala Sitharaman said on October 13 that the RBI is not trying to fix the rupee but only contain volatility. She noted that India’s economic fundamentals remain sound despite the recent depreciation. "The rupee has reached a low and RBI is making a lot of efforts," she said.

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Finance Minister Nirmala Sitharaman on October 13 said the Reserve Bank of India (RBI) would continue taking measures to stabilise the rupee, but emphasised that the central bank was not attempting to defend any particular exchange rate against the dollar.

Speaking at the Bloomberg New Economy Forum in New Delhi, Sitharaman acknowledged that the rupee had depreciated significantly, but maintained that India's economic fundamentals remained sound and its foreign exchange reserves were adequate.

"The rupee has reached a low and RBI is making a lot of efforts through their regulatory powers so that the rupee stays stable," Sitharaman said, adding that the central bank was not trying to fix the exchange rate but contain volatility.

Her comments come after the RBI announced a series of measures to support the rupee, including a special dollar facility for public-sector oil companies and tighter regulations governing foreign exchange transactions.

The rupee, which had weakened to 96.73 against the dollar, recovered sharply on October 12 and extended its gains on Tuesday, strengthening to around 95 per dollar during intraday trading.

Rupee depreciation remains a challenge

Sitharaman said multiple factors had contributed to the rupee's depreciation, but argued that India's fiscal position should reassure international investors.

"I would have thought that fundamentals are fine, forex reserves are sound," she said, while acknowledging that the depreciation had been significant.

The finance minister stressed that fiscal discipline remained a priority for the government and that efforts were being made to preserve macroeconomic stability.

Fiscal discipline, she said, should not be a matter of concern for investors, although the rupee's movement against the dollar remained a challenge.

Regulatory reforms attracting foreign capital

On foreign direct investment, Sitharaman said regulatory liberalisation and India's expanding domestic market had made the country an attractive destination for international investors.

Most sectors drawing foreign capital had seen substantial easing of regulations, she said, with improving the ease of doing business guiding the government's policy decisions.

She argued that India's growing middle class offered investors confidence that manufacturing facilities established in the country could serve both domestic and international markets.

However, when asked about capital outflows and retaining foreign investments, the finance minister acknowledged that keeping capital invested in India was not entirely within the government's control.

AI, semiconductors and clean energy draw investment

Sitharaman identified artificial intelligence, semiconductor manufacturing, data centres and clean energy as emerging destinations for capital.

While global hyperscalers and frontier AI companies were attracting significant investments, she said India was also focusing on helping businesses adopt artificial intelligence to improve productivity.

"It is not just AI, but also semiconductors," she said, highlighting investments across semiconductor chip manufacturing, design and packaging.

India had consciously chosen to develop capabilities in both advanced chips and less sophisticated semiconductors, which continued to be essential for much of the economy, she added.

The finance minister also pointed to investments in data centres, power transmission networks, renewable energy, green hydrogen and green ammonia.

Private sector investment gathering momentum

Sitharaman said India's private sector had begun stepping up investment after a prolonged period of balance-sheet stress and cautious capital expenditure.

She recalled that companies and banks had previously struggled with stressed assets and weak balance sheets, but reforms had helped strengthen the banking system.

Indian companies had accumulated substantial cash reserves, she said, adding that she had previously criticised businesses for earning passive income rather than investing.

However, domestic capital was now increasingly flowing into renewable energy, semiconductor design, biosimilars, pharmaceutical manufacturing and aircraft maintenance, repair and overhaul facilities.

She cited the expansion of India's civil aviation sector, which she said was growing at around 16 percent, as another area creating opportunities for investment.