India's 23% rupee plunge to suffer further dip

Growth in the quarter was already the weakest for the last nine years, marked by a contraction in manufacturing output.

Coface, a credit insurance firm, said that India's weakening external demand and the tightening of monetary policy between March 2010 and October 2011 is holding back the country's growth. Coface is expecting GDP to grow by 6.5% over the year.

"Growth in the quarter was the weakest for the last nine years and was marked by a contraction in manufacturing output. The rupee, with a 23% plunge in June 2012, continues to suffer downwards pressure linked with a high sovereign risk and the slowdown in DFI. These continuing stresses relating to the currency, the fears of inflation and the level of public debt do not leave any scope for an economic stimulation plan, despite the economic slowdown," Coface added. 

"In addition, the weakened status of the Congress Party following the March 2012 elections has slowed the structural reform calendar. With the continuing level of corruption, infrastructures which still show little efficiency and the decline in the quality of regulation giving rise to concerns among foreign investors, the business climate is having a negative impact on growth," Coface said.