A man who runs a government subsidized food shop weighs lentil inside his shop in the southern India
n city of Chennai. (Reuters)
The rupee has fallen to a fresh low despite continued government measures to boost the currency's value, as India's multi-billion dollar plan to provide cheap food to the poor raises concerns among dealers.
India's government had earlier given the nod for infrastructure projects worth several billions of dollars in a bid to boost investment in the country, which is suffering from an economic slowdown and continued decline in currency value.
Finance Minister P. Chidambaram said the country will spend 1.83tn rupees ($28.4bn; £17.7bn; €21.2bn) on 36 stalled projects in various sectors including oil, gas, power, road and railways.
"The message that we are sending is that the investment cycle has restarted, and we are pushing it. It is gathering pace," Chidambaram said in a news conference.
Nevertheless, the announcement failed to boost investors' confidence and the rupee has fallen to a fresh low. As at 9:45 GMT, the dollar is trading at 65.91 rupees, up 2.49%.
Rupee 'Overshot its True Level'
The Indian currency has fallen by about 16% against the US dollar since May and has been the worst performing currency in Asia. The country's attempts to contain the slide in the currency have so far failed to make any change.
There were different opinions regarding the cause of the rupees decline. While some economists blamed the US Federal Reserve's planned scaling back of its massive stimulus programme - worth $80bn a month to markets - others criticised India's mismanagement of its economy.
Chidambaram admitted that the rupee has "overshot its true level", but noted that India is not the only country facing problems.
"Every emerging market is challenged today. So India is also challenged, and the impact is felt both on the equity market as well as the currency market," he said.
"I think we'll simply have to be patient, be firm, do whatever is required to be done, and the rupee will find its appropriate level."
Food Security Bill
The lower house of the country's Parliament, known as the Lok Sabha, approved a controversial bill to provide cheap grain to almost two-thirds of the country's impoverished population.
Some analysts say the additional expenses for the government stemming from the bill are likely to prompt ratings agencies to lower the country's debt rating. The new plan would cost $23.9bn per year for an economy that already suffers from a growth slowdown and a widening fiscal deficit.
The finance minister, however, said that food security bill will not affect the country's fiscal deficit target.
"After providing for the Food Security Bill, we will remain within the limit I have set for myself in the budget," he said.
The key legislation still requires the approval from the upper house, known as the Rajya Sabha.
To contact the editor, e-mail: