The IMF said Thursday that economic "vulnerability" of India had recently worsened, while refusing to "speculate" on the possibility of an application for financial assistance in the country.
"The combination of large budget deficits and current account balance, the persistence of high inflation and dependence namely capital inflows are the old vulnerabilities that have increased" recently said Gerry Rice, spokesman for the international Monetary Fund.
Faced with the prospect of a tightening of U.S. monetary policy, India has seen foreign capital flowing back, plunging the value of its currency against the dollar. On Wednesday, the rupee fell to a record low before recovering Thursday.
According to Rice, the deterioration of the Indian economy "clearly affected market confidence" and is a "challenge" to the authorities.
"This is also an opportunity for the Government to continue its political efforts on a number of fronts," he said at a press conference in Washington, without giving further details.
Wednesday evening, the Reserve Bank of India (RBI) has announced it will provide dollars directly to oil companies, via a separate establishment, to calm the volatility in the foreign exchange market.
Asked about a possible Indian request for financial assistance, IMF spokesman, however, declined "to speculate."
India had appealed to the Fund in 1991 to deal with a crisis in its balance of payments, which measures including the influx of foreign capital.
