The sense of crisis building around the rupee's precipitous fall is likely to deepen on Friday with the release of data expected to show India's economy slowing to dangerously low levels.
A dearth of investment lies at the heart of India's economic malaise. Little improvement is expected any time soon, with investors doubting whether Prime Minister Manmohan Singh's minority government can force through bold reforms with an election due within eight months.
Economic growth virtually halved in two years to 5 per cent in the fiscal year that ended in March -- the lowest level in a decade -- and most economists surveyed by Reuters in the past week expect 2013/14 to be worse.
"The economy appears to be entering a tailspin as business confidence collapses under the weight of rapid rupee depreciation, rising energy costs, sharply tightening financial conditions and policy confusion," BNP Paribas said in a note on Wednesday.
The withdrawal of funds from emerging markets as investors re-adjust portfolios in anticipation of higher U.S. interest rates has caused tremors from Brasilia to Jakarta. But the weight of India's current account and fiscal deficits has seen the rupee sink faster than most currencies.
However much Finance Minister P. Chidambaram protests that the market's move is overdone, investing in a currency that has lost around 20 per cent since May would be a test of bravery that even India's richer diaspora living abroad could flunk.
In the eight sessions through Tuesday, investors pulled out $1 billion from India stocks. Total net outflows from stocks and bonds have totaled $7.4 billion since May.
Thank heavens for a good monsoon, which should boost rural income and perk up flagging consumer demand, because without it the economy would be looking a lot worse than it already does.
India's statistics office is due to release GDP data for the June quarter at 1730 IST on Friday, bringing down the curtain on what has probably been the worst week for the rupee in nearly 17 years.
The GDP print is likely to be fittingly gloomy.
A Reuters poll of 36 economists showed India's gross domestic product (GDP) expanded 4.7 per cent year-on-year in the quarter to June, near decade lows on an annual basis and a tad under the 4.8 per cent growth in the previous three months.
Raghuram Rajan, the much-vaunted former chief economist at the International Monetary Fund chief economist, is set to take over as governor of the Reserve Bank of