The Indian rupee fell to a record low today as investors pulled money out of the country amid fears of a slowdown in growth.
The currency fell by around 1.7 per cent from the previous close to a low of 62.70 against the dollar. The rupee has fallen by nearly 16 per cent since May and has overtaken the Australian dollar and Japanese yen to become Asia's worst performing currency this year. Across the world, only the Russian real and South African rand have fallen further.
Since the beginning of June, international investors have pulled $11.58bn in shares from the markets, according to official data. Yields on India's ten-year debt rose past nine per cent for the first time since late 2011.
Brutal day in India. Rupee strode past 63, but check-out the 10-year bond yields. Yikes! pic.twitter.com/NcDJoHn9Ws— jamescrabtree (@jamescrabtree) August 19, 2013
This comes as investors fear a slowdown in Asia's third largest economy. India grew at an annual rate of five per cent in the 2012/13 financial year – the slowest pace in a decade. And the country’s current account deficit has been growing, hitting 4.8 per cent of GDP in the last fiscal year, prompting further fears for the rupee.
But Kaushik Basu, the World Bank's chief economist, thinks comparisons to the 1991 crisis (in which India required a bailout from the International Monetary Fund) are exaggerated.
Growth may not have bottomed out. We have further to go (down), but the situation is not as bad as is being captured by the mood and captured in the headlines.