India’s rupee hit a new low and shares slipped another 1.3 percent on Monday on growing fears about the country’s slowing economy and the government’s ability to stem a deepening economic crisis.
The rupee, now Asia’s worst-performing major currency this year, fell to 62.35 rupees to the dollar, past its previous low of 62.03 on August 16.
Indian shares, which fell nearly four percent on Friday, plunged another 1.30 percent to 18,356.54 points with nervousness setting in over the future of the currency as foreign investors pull out cash.
Dealers said they feared the rupee could weaken further on concerns that central bank measures taken over the past three months would not help the ailing currency.
At Monday’s new low, the rupee has fallen nearly 14 percent against the dollar this year, outstripping the yen in its tumble.
Last Wednesday, in the latest of a series of measures to prop up the currency, India’s central bank spooked investors when it tightened controls on the amount of money Indian firms and individuals can send abroad.
The move has been criticized as a disturbing throwback to the days before India unleashed its economic liberalization drive in the early 1990s when Indians’ access to foreign exchange was strictly limited.
In the past few weeks, Indian policymakers have hiked short-term interest rates, announced plans to allow state firms to raise foreign funds abroad, and curbed gold imports.
Emerging market currencies have been hit by the prospect of the United States rolling back stimulus measures that have been responsible for huge inflows of foreign investment into them.
India relies on foreign capital to fund a large current account deficit.
Sonam Udasi of IDBI Capital Markets said: “For all investors, growth remains the most critical issue. Until that gets back on track, the nervousness will remain.”
India’s growth has slackened sharply to a decade-low of 5.0 percent in the year to March amid a sharp slowdown in industrial activity.
Since June 1, overseas funds have pulled out $11.58 billion from India’s stock and debt markets.