The Indian rupee dropped past the 64 to 1 ratio (US$1) on Tuesday for just the first time. Bond yields also spiked to a high of five years before the country’s central bank started selling dollars.
The third largest economy in Asia took the brunt of the global selloff in emerging markets.
Highlighting just how hard it is for central government to get reforms pushed through despite an economic outlook that is deteriorating, parliament adjourned Tuesday because of protests by some members over a scandal involving corruption.
Parliament’s notoriously dysfunctional lower house in India set to debate legislation to allow for foreign investment in the private pension industry that is currently fledgling.
The reform is seen by supporters as a key to the efforts of the government to attract international investment and lower the account deficit, which has exacerbated the currency crisis.
One analyst put much of the blame on the parliament in India saying the country is nowhere near a resolution to the currency problem because nothing is being done in New Delhi.
He said they are not focusing on improving infrastructure, productivity or getting back the FDI – foreign direct investment.
Later in the day on Tuesday, India was to have a sale of $9.3 billion in government debt quotas, which is a gauge of the interest of foreign investors in local assets.
Members of the banking industry said the debt limits at Tuesday’s auction might get purchasers, but it would be at prices that were rock bottom.
Foreigners have sold off close to $10 billion in India debt since late May, when the Federal Reserve Bank in the U.S. first announced its intentions of starting to scale back its purchases of billions of dollars of bonds monthly.
Now they have just 43% of the of the limit of $30 billion in government debt in India.