demand is weak. Manufacturing activity has virtually stagnated, hitting merchandise exports and widening the trade deficit.
At nearly $90 billion India's current account deficit is the third largest in the world. Chidambaram has pledged to narrow it to $70 billion this fiscal year.
Exports might benefit from the rupee's descent, but it will exacerbate the oil import bill, increase fuel subsidy costs and pump up inflation. It appears to be a vicious circle.
The rupee could recover if growth attracted investment, but the trends are going the wrong way, with the June quarter expected to mark a third consecutive quarter below five per cent.
"Expectations about economic growth are already rock bottom. But if the GDP data undershoots them, it could prompt more weakness in the rupee," said Mark Williams, chief Asia economist at Capital Economics in London.