India: the rupee rout continues

published 29 August 2013

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.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

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

MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.