The rupee fell to its lowest ever against the US dollar on Thursday on the back of weak macro-economic fundamentals, broad dollar strength overnight and declining Asian peers, but mild intervention from the central bank helped stem losses.
The rupee's last record low was 68.87 per dollar, hit on November 24, 2016.
The falling rupee also took a toll on Indian stock markets. India relies on imports to meet about two-thirds of its fuel needs, making it one of the most sensitive in the region to advances in oil prices. As the oil prices continue to rise, the deficit is likely to widen in the coming fiscal, dragging the rupee to fresh lows in the coming months. Higher crude oil prices and a declining rupee are a double whammy for India, forex dealers said.
"Ekta Batra, a business journalist, says, ".Look at our resilience versus other Emerging Markets since the past 5 years.
Though some of the analysts view the Indian rupee to be not affected majorly from the global crisis, still it has emerged to be the weakest performing Asian currency so far this year with a decline of nearly 8% since the start of 2018.
Moody's Investors Service said India's large and relatively stable domestic financing base limits its external vulnerability, contributing to "the economy's resilience by sheltering it from abrupt changes in external financing conditions".
Collapse of Indian rupee to a lifetime low of 69.10 against the USA dollar will not give an extra edge to domestic exporters, but provide a level-playing field in global market, FIEO said.
Now it's likely that the Reserve Bank of India will step in to arrest this decline, believe analysts. In the run-up to 2014 elections, Modi had asked whose age the fall in the rupee reflected - the prime minister or the finance minister.
Borrowing to invest in India also becomes expensive.
The surge in the West Texas Intermediate (WTI) Crude Oil from around $58 per barrel in January to a $72 in May dragged the rupee lower from around 63.5 to 68.5 over the same period.
Overseas investors have reduced holdings of rupee-denominated government and corporate bonds by $6.1 billion, and pulled $785 million from equities since the beginning of 2018.