India battling fall of rupee, but will not introduce capital controls

India has assured foreign investors it is not contemplating capital controls as a step to stabilise the falling Indian rupee.

Prime minister Manmohan Singh said the rupee’s sudden decline is a shock, but his government will not address it by imposing capital controls or by reversing reforms.

India’s stock market has dropped more than 10% in the past three months and the rupee has lost a sixth of its value against the dollar this year. Much of that fall has been in the past month.

Mr Singh said the rupee’s weakness largely stems from India’s large current account deficit, caused by huge imports of gold and higher costs of crude oil and coal imports.

The government has raised gold taxes and hiked deposit rates to combat the outflow of money.

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