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 Add Comment Indian Rupee hits record low vs US dollar 08/27/20131 Comment   MUMBAI: The rupee hit a record low on Tuesday and posted its biggest single-day fall in nearly 18 years after the lower house of Parliament approved a nearly $20 billion plan to provide cheap grain to the poor, raising concerns the fiscal deficit will blow out even further. The partially convertible rupee closed at 66.24/25 per dollar after hitting a record low of 66.30, and down 2.9 per cent from its close of 64.30/31 on Monday. This is the biggest single-day drop for the currency since October 1995, according to Thomson Reuters data. The 194 basis points fall also marks the rupee's biggest single-day decline in absolute terms ever. Finance minister P Chidambaram said on Tuesday the government would stick to its fiscal deficit target for the year, while announcing cabinet approval for power and infrastructure projects worth Rs 1.83 trillion. Yet the comments failed to sway investors, with market watchers sceptical about India's ability to attract funds for infrastructure projects in an economy growing at a decade-low of 5 per cent. The rupee has been beaten down 17 per cent so far in 2013 despite frantic attempts by the government and central bank to shore it up. Indian stock markets were also hit on Tuesday, raising the prospect of further capital outflows, with the benchmark BSE index falling 3.2 per cent and the broader NSE index ending down 3.45 per cent. Overseas investors sold over $800 million worth of shares in the previous seven sessions through Monday, adding to pressure on the rupee. "The Food Security Bill is the key reason for the rupee's fall on Tuesday. It would open floodgates for (credit) ratings downgrades, if the fiscal deficit is not reined in," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank. The government hopes to contain the fiscal deficit at 4.8 per cent of gross domestic product for the year ending in March, but fears are growing it will be tempted to launch a flurry of fresh populist spending ahead of elections which are due by May. The Food Security Bill, budgeted to cost Rs 1.35 trillion annually, is a key part of the ruling Congress party's strategy to win re-election in polls, with its focus on selling subsidised wheat and rice to 67 per cent of its population of 1.2 billion. The country's record high current account deficit has already made it particularly vulnerable as global investors brace for the end of the Federal Reserve's period of cheap money, and measures taken so far by policymakers have been inadequate to stem the rout. Kotak Institutional Equities said there would be "no free lunch," estimating India's subsidy burden of the plan would end up reaching Rs 827 billion from the budgeted Rs 606 billion. "There are substantial challenges in procurem