Falling rupee likely to be election issue in India

The Indian rupee, one of the worst performing Asian currencies, is likely to be a major election issue in a bunch of upcoming state assembly elections in India. These elections in turn lead to the general elections next year.

Since the start of this year, the rupee has lost about 11 per cent of its value in nominal terms vis-a-vis the US dollar. On Monday, the currency depreciated 81 paise to 72.65 against one US dollar in early trade on the Mumbai foreign exchange market. It is currently hovering in the region of 72.43.

The Indian currency's fall, coupled with the rise in international crude oil prices, has resulted in a high degree of disquiet in India with petrol selling at record prices. The fear is that this will stoke inflation. A combination of a falling rupee and higher food prices can be a deadly cocktail for any ruling party during India's election season. Moody's Investors Service has said in a report that there are risks of India breaching the 3.3 per cent fiscal deficit target for the current financial year as higher oil prices add to short-term fiscal pressures.