WITHIN hours of the rupee hitting a record low of 54.52 against the dollar this week and the Sensex closing at its lowest since January 2012, finance minister … Pranab Mukherjee promised unspecified austerity measures while reminding all that he wouldn’t mind biting the bullet on subsidies provided it did not “end in a fiasco”. Soon after, [Citigroup] issued a scathing report, pointing out that “the problems appear self-inflicted, with India now seen to be specialising in scoring self goals.” The spectre of a leftist sweep in austerity-averse Greece had European bourses tumbling and the impact of little investor confidence in the euro could be seen across Asian stock exchanges.

These are dangerous portents for the global economy, but of dwindling relevance to a country whose economic and political fundamentals have been consistently described as shaky by more than one credit rating agency in recent weeks. The Reserve Bank of India … that has been insisting that it would intervene to curb rupee volatility only if it is caused by speculation, has reportedly sold a little over $20bn to arrest the fall of the rupee between September 2011 and March 2012…. The question must be asked — if the RBI’s efforts since September … could not salvage the rupee as envisaged, is the picture even bleaker?

The same Citi report … has warned that the currency could well hit 60 to a dollar if the government does not act soon. Mr Mukherjee is already on the defensive…. But even he must realise that it won’t do to remain evasive. The government must spell out the measures it plans … if it wants to avoid a fiasco. — (May 18)