As per Economic times, The rupee skidded to an all-time low on Tuesday as oil refiners and other companies scrambled to buy dollars, with the currency looking increasingly vulnerable to a swelling current account deficit.
In the recent times India has opened doors for debt capital by relaxing caps on ECB, FII etc. Coupled with interest rate differential between india and developed world, there was tremendous increase in the external debt in India. India's overall external debt outstanding as of June-2011 was $317 billion, an increase of 38 per cent in last two years. The short-term external debt increased at a much faster pace of 62 per cent (in absolute terms) during the same period and it now constitutes about 21.6 per cent of total external debt. One worrying factor is that much of the debt is maturing in next one year. Due to re-capitalisation needs of European banks, it is likely that these banks will be less forthcoming in refinancing Indian corporate debt. All this is pushing pressure on rupee and has increased demand for dollar which is depreciating rupee..