Bad news on every front
Plunge in the rupee reflects deteriorating economic fundamentals in India, while stubborn inflation fans widespread discontent just months before an election.
The Indian rupee continued its freefall last week as the economic news went from bad to worse for a government that is facing general elections just eight months from now.
The Indian currency has lost 15% against the US dollar this year, sinking to an all-time low of 65 last Thursday despite some intervention earlier in the week by the Reserve Bank of India. Market anxiety has led to volatility in the stock market, with the BSE Sensex down 4.8% for the year to date. Meanwhile, inflation continues to frustrate policymakers who have seen the rate of economic growth slow considerably in recent years.
With general elections looming in April and opinion polls indicating strong anti-incumbency sentiment, political uncertainty is further dampening the sentiment of investors, both foreign and domestic.
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