Rating agency Moody's said that while the rupee depreciation was a new variable for the economy, the factors underpinning it have been incorporated in its investment grade rating for India. India is at the lowest investment-grade sovereign rating. Prime Minister Manmohan Singh's weak coalition government, heading into national elections by next May, has been hamstrung from pushing through reforms to attract more long-term capital.
The rupee's plunge adds to worries about India's ability to fund a record high current account gap and whether Finance Minister P. Chidambaram will be able to meet his goal to pare the fiscal deficit to 4.8 percent of gross domestic product (GDP) this fiscal year.
Analyst Atsi Sheth said, "We believe that meeting the fiscal deficit target will be very challenging this year, given lower than anticipated growth holding back revenue growth and steep rupee depreciation raising the subsidy bill on imported goods,".
Gujarat Chief Minister Narendra Modi today attacked the government for the free fall of rupee against the US dollar, saying the Centre is not concerned about the economy. Terming the leadership as direction less, he said, "The country might have never imagined that it would face such an economic crisis. But when leadership during such a crisis is direction less, then hopelessness increases. The Centre has not taken any step to install confidence among people."