The rupee weakened to 65 to the dollar in opening trade on Tuesday, not far from its record low of 65.56 reached last week, as the Lok Sabha cleared the food security bill that would cost about Rs. 1.3 lakh crore to the exchequer.
At 10.30 am the rupee was trading at 65.33 against a dollar, below its close of 64.30/31 on Monday.
The bill, which seeks to provide foodgrains at highly subsidised rates to an estimated 810 million people across the country, is a key part of the ruling UPA government's strategy to win a third term.
However, analysts say the new legislation, entailing massive government expenditure, will only widen deficit and fuel inflation.
India's benchmark 10-year bond yield dropped 4 basis points at open to 8.30% as the Reserve Bank of India announced an open market purchase of bonds but soon edged higher, tracking weakness in the rupee.
The slide comes hours ahead of a crucial debate on the state of the Indian economy in Parliament on Tuesday.
In the wake of the rupee's depreciation and doubts over revenue increase targets, the government has repeatedly asserted it will meet the fiscal deficit target of 4.8%.
Global ratings agency Fitch on Monday had said India's fiscal numbers "look weak" and warned of a downgrade if the country is unable to meet the fiscal deficit target.
A strengthening dollar overseas and late weakness in local stocks also put pressure on the rupee, a forex dealer said.
At 10.30 am the rupee was trading at 65.33 against a dollar, below its close of 64.30/31 on Monday.
The bill, which seeks to provide foodgrains at highly subsidised rates to an estimated 810 million people across the country, is a key part of the ruling UPA government's strategy to win a third term.
However, analysts say the new legislation, entailing massive government expenditure, will only widen deficit and fuel inflation.
India's benchmark 10-year bond yield dropped 4 basis points at open to 8.30% as the Reserve Bank of India announced an open market purchase of bonds but soon edged higher, tracking weakness in the rupee.
The slide comes hours ahead of a crucial debate on the state of the Indian economy in Parliament on Tuesday.
In the wake of the rupee's depreciation and doubts over revenue increase targets, the government has repeatedly asserted it will meet the fiscal deficit target of 4.8%.
Global ratings agency Fitch on Monday had said India's fiscal numbers "look weak" and warned of a downgrade if the country is unable to meet the fiscal deficit target.
A strengthening dollar overseas and late weakness in local stocks also put pressure on the rupee, a forex dealer said.
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