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.

655-rupee-chart

This crisis will pass, said Sharma. But don't expect a "meaningful turnaround" in India's fortunes until a new government is in place.

Stay up to date with MoneyWeek:Follow us onTwitter,FacebookandGoogle+

Recommended

I wish I knew what an emerging market was, but I’m too embarrassed to ask
Too embarrassed to ask

I wish I knew what an emerging market was, but I’m too embarrassed to ask

This week's “too embarrassed to ask” explains what emerging markets are, and why you might want to invest in them.
9 Sep 2020
The Arab Spring ten years on: a revolution that failed to blossom
Global Economy

The Arab Spring ten years on: a revolution that failed to blossom

Ten years ago, the Arab world was rocked by mass protests and popular uprisings that ousted long-reviled dictators. For the most part, the end result …
23 Jan 2021
Why investors should beware of India’s surging stockmarket
Emerging markets

Why investors should beware of India’s surging stockmarket

The BSE Sensex benchmark index has soared by 90% since March, largely driven by foreign investors. But India's bull market is very vulnerable.
15 Jan 2021
How to invest in Africa as it takes its place in the post-pandemic sun
Emerging markets

How to invest in Africa as it takes its place in the post-pandemic sun

The African Continental Free Trade Agreement has come into force. Favourable demographics, improving governance and a growing technology sector also b…
14 Jan 2021

Most Popular

The FTSE 100 is set for a makeover with an influx of new tech stocks
UK stockmarkets

The FTSE 100 is set for a makeover with an influx of new tech stocks

The FTSE 100 – the dullest index in the world – is about to reinvent itself as a host of new firms list on the market. The change is long overdue, say…
24 Jan 2021
Think Tesla is a bubble? This might be the best way to bet on it bursting
Oil

Think Tesla is a bubble? This might be the best way to bet on it bursting

The huge rise in Tesla’s share price means that, by market value, it’s now the sixth-largest company in the US and and the world’s biggest car-maker. …
25 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021