India: the rupee rout continues
The Indian currency has continued to hit new record lows against the dollar.
India continued to bear the brunt of the emerging-market sell-off this week. On Tuesday, the rupee slid by around 3% against the dollar, its worst one-day drop in 18 years. On Wednesday, it fell even further, reaching a new record low of almost 70 to the dollar. The currency has lost around 15% against the greenback this month and a quarter since early May. The benchmark Sensex stock market index has slid by almost 7% this month.
What the commentators said
The latter was in focus this week. The government passed a Food Security Bill. It will sell subsidised wheat and rice to the 1.2 billion-strong population. This revived fears that the government "will be tempted to launch a flurry of fresh populist spending ahead of elections" due by May 2014, noted Swati Bhat of Reuters. The plan is to keep the fiscal deficit to 4.8% of GDP this year, but doubts are growing. According to Kotak Institutional Equities, the subsidies could cost a third more than foreseen.
This crisis will pass, said Sharma. But don't expect a "meaningful turnaround" in India's fortunes until a new government is in place.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Stay up to date with MoneyWeek:Follow us onTwitter,FacebookandGoogle+
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
-
Starling Bank to scrap 3.25% interest rate from popular current account within days
Starling is to remove the generous 3.25% it pays on current accounts from next week – what does this mean for customers and should you move?
By Katie Williams Published
-
Top 20 UK areas where house prices have ballooned in last 25 years
Some parts of the UK have seen house prices grow by 652% since the turn of the millennium
By Daniel Hilton Published