The rupee has outsmarted Chidambaram once again by breaching the 68-mark against the US dollar. The Finance Minister, Chidambaram, has to wait another 20 days exactly to turn 68. He was born on September 16, 1945.

The domestic unit hit an all-time low of 68.75 in early trade on heavy month-end demand for dollars from banks and oil importers amid a sharp fall in the domestic equity market.

Around noon, the rupee was quoting at 68.34 against the previous close of 66.24.

Last year on August 1, 2012, Chidambaram took over the Finance portfolio once again (from Home Ministry) after the incumbent Finance Minister Pranab Mukherjee became the First Citizen of the country. Since then rupee has lost 23 per cent.

Not only against dollar, the rupee has tumbled against the euro and pound as well. In fact, against the pound it is quoting well below the 100-mark. Currently, it is hovering around 106.11 against the UK currency. Against the euro, the rupee is quoting at 91.50.

The slide in rupee and equity markets was chiefly because of the tension over Syria and fear that the Food Security Bill will further inflate the fiscal deficit. Chidambaram, however, claimed that the fiscal deficit would be contained to 4.8 per cent, as projected in the Budget.

Christopher Wood, whose weekly Greed & Fear column is widely followed, said, the Reserve Bank of India’s tightening moves in July, which seem to have been ordered from Delhi in an attempt to shore up the currency, clearly backfired in large part because of misguided communication and conflicting signals.

There have also been over the past week and more retrograde steps to impose restrictions on residents’ capital outflow. Thus, the limit for outward remittances was lowered from $200,000 to $75,000 per financial year. The result has been a further loss of investor confidence and a further decline in the currency.

"The result is that India remains the Asian market most at risk of a sovereign debt crisis with chatter apparently growing in Delhi of a potential need to sound out the IMF. This is despite the fact that India does not have a debt market reliant on foreign capital given the lack of foreign ownership of rupee debt," he said in his Greed & Fear write up.

Elara Capital said: "India's problems are first order. Policymaking would better address the structural bottlenecks within primary agents of economic activity namely land, labour, capital, and business sentiments. In the absence of this, restoration of pre-crisis growth will remain purely aspirational. There is a need to understand the difference between cyclical and structural revival and that a lower rate regime led cyclical revival is passé for India."

Fundamental devaluation as an option to overcome the current crisis is largely ruled out as interplays between various factors in the external and domestic economy cast a shadow on the success out of such a move, Elara said. "Income effect led price-inelasticity on imports together with negative real rates and dieselization of the economy has meant that currency weakening may not yield otherwise standard results. Fact remains that government policies and finances are in such shape that any ill-thought move may probably boomerang with a sovereign downgrade to junk."

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