Rupee Continues Decline on New Evidence of Weakness in Indian Economy

Anindito Mukherjee/Reuters

Construction on the outskirts of New Delhi. The government hopes infrastructure projects will revive India’s sagging economy.

MUMBAI â€" The Indian rupee began slipping lower in currency markets again on Monday and Tuesday after a two-day respite, as further signs emerged of broad troubles in the Indian economy.

An HSBC survey of purchasing managers at manufacturers across India, released on Monday, showed them to be their gloomiest since March 2009, at the bottom of the global economic downturn. Businesses across the country are bracing for a sharp increase in the regulated price of diesel fuel, as the rupee’s steep drop in August has driven up the Indian cost of crude oil, priced in dollars and almost entirely imported.

The rupee was down another 0.5 percent against the dollar on Monday and a further 0.6 percent in early trading on Tuesday, to 66.43 rupees to the dollar, bringing its decline since early May to a little more than 20 percent.

Currency traders said that they perceived hints of modest intervention to cushion the decline by the Reserve Bank of India, the country’s central bank, which acts through state-controlled commercial banks when it does intervene so as to camouflage its activity.

The Mumbai stock market showed signs of recovery on Monday, with the benchmark Sensex index rallying 1.43 percent by late afternoon.

Exporters would be expected to benefit from a cheaper rupee. But poor roads, restrictive labor laws and heavy regulation have left India with a manufacturing sector that, although stronger than a decade ago, still struggles to compete with China and other East Asian economies. Indian companies rely heavily on imports for materials and equipment that they cannot buy within India, and the costs of those imports are surging as the rupee falls, limiting gains in Indian competitiveness.

At Challenge Overseas, a manufacturer of trousers on the northern outskirts of Mumbai that exports mainly to the Middle East, the floor and corners of the factory were piled high over the weekend with rolls of gray and black fabric, six feet long and a foot in diameter. But all of the fabric had been imported from China.

“Our owner goes to China every three months,” said Javeri Savia, the general manager of production. “The newer textures and weaves all come from China.”

Like many Indian factories, Challenge also lacks economies of scale. It has just 60 workers to cut, sew and iron its trousers, which sell at wholesale for about 1,000 rupees, or $15, apiece. Similar factories in China often employ several thousand workers. “When you compare with China and all of them, we are peanuts,” Mr. Savia said.

The rupee traded from 52 to 55 to the dollar until early May, when it began a gradual slide that the Indian government tried to arrest through market intervention and other measures, including raising the tax on gold imports.

The rupee continued drifting down through the summer, then began falling faster in mid-August when senior government officials made it clear in speeches that they were reluctant to resort to more drastic measures to arrest the rupee’s decline, like sharp increases in interest rates or an imposition of stringent controls on moving large sums of money in and out of the country.

The rupee briefly fell last Wednesday to almost 69 to the dollar, prompting the Reserve Bank of India to supply dollars from its reserves through a local bank to the country’s state-controlled oil refiners and distributors. That industry tends to be India’s biggest buyer of dollars so as to pay for crude oil imports. The rupee slowly crawled back above 66 to the dollar on Thursday and Friday before drifting down a little on Monday.

Paritosh Mathur, the head of fixed-income and currency trading in India for Deutsche Bank, said that volatility in the rupee’s value appeared to be diminishing. He said he saw little chance that the rupee would return to its levels of last spring in the next two or three months, but also little chance that it would test the lows of last Wednesday.

The HSBC index of purchasing managers’ sentiment fell to 48.5 in August, from 50.1 in July. A figure below 50 indicates a contraction in activity. Overall new orders and new export orders declined. Purchasing managers also indicated that they were buying less material for future production and were keeping smaller inventories of finished goods on hand, apparently in anticipation of weak sales.

Leif Eskesen, HSBC’s chief economist for India and Southeast Asia, cut his forecast for Indian economic output to 4 percent for the Indian fiscal year through the end of next March, from a previous forecast of 5.5 percent. He also cut his forecast for the following fiscal year to 5.5 percent, from 6.6 percent.

“The recovery is likely to prove protracted as confidence will only return reluctantly, and the structural reforms will only pass through to growth very slowly,” he said in a research report.

Julian D’Souza, the South Asia director in the Mumbai office of the Conference Board, a group based in New York that issues leading economic indicators, said many manufacturing industries were hobbled by high transport and electricity costs. But auto parts factories tend to have modern equipment and good locations close to ports.

“That’s one area where India can start exporting,” he said.

American and European auto parts makers are already facing heavy competition from China, however, so further exports from India might fan trade tensions.

Neha Thirani Bagri contributed reporting.

A version of this article appears in print on September 3, 2013, on page B2 of the New York edition with the headline: Rupee Continues Decline on New Evidence of Weakness in Indian Economy.

Image of the Day: September 2

Sajnay Baid/European Pressphoto Agency A Tibetan woman waiting to perform a traditional dance at an event to mark the 53rd Tibetan Democracy Day celebrations in Dharamsala, Himachal Pradesh.

Why Women Journalists in India Still Can’t Have It All

Aijaz Rahi/Associated Press A candle light vigil in Bangalore, Karnataka, on Aug. 24 to protest the gang rape of a Mumbai-based photojournalist.

After the gang rape of a 22-year-old photojournalist in Mumbai last month, a growing number of female journalists in India have broken the silence around sexual harassment and violence they have faced while doing their jobs.

In their accounts, the women highlight some of their experiences, which are seldom discussed in newsrooms because reporters run the risk of losing an assignment if they come across as weaklings.

As a young journalist with CNN in 1996, Suhasini Haider was part of the crew that covered the national election that year. It was the first she had covered. Even after 17 years, she cannot forget the experience she went through during an overcrowded public rally she attended outside of Delhi, near the northern Indian state of Haryana.

“We were horrified by the number of times our bottoms got pinched and we were brushed past,” said Ms. Haider, now the foreign affairs editor of the Indian television station CNN-IBN.

Ashima Narain, the photo editor of National Geographic Traveller, wrote recently in the national daily The Indian Express, “I think it is time not to be ashamed to talk about fear.”

Fear is what ensures I look back as I walk, it’s what makes me look for exits when I enter potentially difficult spaces, it is what keeps me alert and often, alive. I call it other things like discomfort or commonsense, because it’s weak to be afraid â€" it might expose me for what I am, a woman.

Ms. Narain argued that there was an urgent need for media organizations to provide safeguards to their employees, who are often “expected to take calculated risks,” she wrote.

“For our jobs we need to go to unsafe places,” said Nazia Sayed, 29, a crime reporter with Mumbai Mirror newspaper. She has developed a routine of contacting the nearest police station whenever she is reporting late at night. “Just in case something happens, at least someone knows where I am,” she said.

When you need the police, it does help being a crime reporter. Recently after reporting on a murder, Ms. Sayed was returning home after midnight in a Mumbai local train. She was traveling in a women’s-only compartment and noticed a group of six men had entered the women’s coach.

There were no policemen onboard and she was uneasy with the men’s presence. She repeatedly asked them to move out, but they refused to budge.  One of them taunted, “She is a girl â€" what can she do?”

Ms. Sayed called the nearest police station. “The police came and chased them away,” she said.

She did not share this incident with her editor, she said, because she felt she was able to handle it on her own.

Not every woman who travels on the trains in Mumbai has the same sense of security. “When one is traveling late at night with heavy and costly equipment, it is quite risky traveling alone,” said Shriya Patil Shinde, 32, a freelance photographer in Mumbai. She carries a can of pepper spray as she often encounters drug addicts and drunken men as co-passengers on the train at night. “In media organizations, those who are put in charge of assigning work to reporters or photographers should be more sensitive,” Ms. Shinde said.

Her husband also works as a photojournalist, and the couple often report on same subjects. Covering news stories involving crowds exposes both male and female photojournalists to violence. “I feel more vulnerable because of the threat of sexual violence,” she said.

In 2005, Ms. Shinde was covering the premiere of the Bollywood actor Aamir Khan’s movie “Mangal Pandey” at a theater in Mumbai. “Aamir Khan was sporting a new look for the film, and there was a big crowd that had come to see him,” she said. “We could not see him, but held our cameras high up, just to get that an image of the actor.”

In a swarm of people, a man tried to grope her. “I could not see his face. I screamed,” she said. No one heard her. She lunged her camera in the man’s direction and hit him, which sent him off.

Reporting from rural India comes with its unique set of difficulties. Anumeha Yadav, 30, a correspondent with The Hindu newspaper, has over the last year reported from the eastern Indian state of Jharkhand, which is prone to violence by Maoist rebels. Jharkhand is also one of the most economically backward states of the country. “When I am reporting, I am not worried about Naxal attacks,” Ms. Yadav said. “They do not usually target reporters.”

Ms. Yadav is very careful about traveling at night, she said. There is a high risk of being robbed on highways in Jharkhand. On reporting assignments, she is usually accompanied by a male photojournalist, who is also vulnerable to attacks. But being a woman, “the possibility of rape comes to my mind,” she said.

For India’s female journalists, it is a big leap from the way things were a few decades earlier, when women weren’t even allowed to leave the office to report. Journalism in India was a male bastion in the 1940s and the 1950s, with the exception of a few women in newspaper offices, who usually wrote columns or worked on weekend editions but were almost never sent on reporting assignments by their male bosses.

The first woman to break the convention and make a mark in Indian journalism was the legendary photojournalist Homai Vyarawalla, who died last year. She began her career in the 1930s, covered major political events and personalities, and even photographed some events in World War II along with her photographer husband.

“Women were not taken seriously in journalism,” said Usha Rai, who worked in the Indian print media for 37 years. “Men thought that beat reporting was their preserve,” she said.

“I was part of the generation that covered flower shows and fashion shows,” said Ms. Rai, who started her career in 1961 as a trainee reporter with The Indian Express in Bombay, now known as Mumbai, and went on to become a pioneer of development journalism in India.

She said that female reporters of her generation fought hard to prove that they were not just “social butterflies” hanging out in newspaper offices. Her contemporary, Prabha Dutt, who died several years ago, was the first female journalist to cover war in India. “Her editors at Hindustan Times refused to send her,” Ms. Rai recalled.

But that did not stop Ms. Dutt, who took leave from her office to go to the frontier and filed dispatches during the second war that India fought with Pakistan in 1965. The initial reports were ignored by her editors at the Hindustan Times, but gradually they were published because they were good, Ms. Rai said.

The rise of journalism schools in the 1960s and the accompanying social changes in India helped women become more visible in the profession and leave their imprint on Indian newspapers and magazines over the years.

The battles Ms. Dutt fought with her editors to go out into the field might seem quaint in the contemporary India, as some of the best-known reporters covering conflicts, among other subjects, are women. Yet even the most ambitious female journalists have to take into consideration the menace of sexual harassment as they go about their professional lives.

“At times you are interviewing someone and he asks an odd question or makes a remark that leaves you wondering whether you make a comment and lose a source or ignore it,” said Ms. Haider of CNN-IBN.

She still recoils from an experience from about 20 years back, when she was working with CNN in India. She had been trying hard to interview an Indian government official. The official eventually agreed to meet her at his house. Ms. Haider arrived to find him alone at his home.

“He asked me nosy questions about my personal life,” she recalled. The official made numerous phone calls to her after the interview.

She stayed silent about the harassment. “If I had reported it, I would have lost an assignment,” said Ms. Haider, who now regrets that she didn’t register a complaint.

For Girls in India, the Pressure to Conform Comes From Family

I recently watched the remarkable Malala Yousafzai speak at the United Nations to commemorate a day that is named after her. The 16-year-old who was shot by the Taliban, and has since become a celebrated activist for education and women’s rights, said that Malala Day was for “every boy and every girl who have raised their voice for their rights.” She bravely reinterpreted Islam and accused the extremists of being afraid of books, pens and education. “The power of the voice of women frightens them,” she said.

Malala is the same age as my older daughter. While she uses her voice to assert her rights, her use of the word made me think of the many other voices that my daughters and girls all over the world hear, telling them what to wear and how to behave. I have a ringside view of how this plays out with my two daughters, who were born in the United States but now live among our family in India, where the pressure on young girls to conform comes not just from society, but from family. It would be ridiculous to compare it to the limits on Malala and the young women of the Swat Valley, but its root lie in similar expectations.

Seven years ago, my husband and I uprooted our two daughters, Ranju and Malu, from their comfortable lives in Manhattan and moved to India to be closer to our aging parents, and to allow our American-born children to know their Indian heritage.

Today, Ranju is 16 and Malu, 11. They are entrenched in India and surrounded by family. For my daughters, dealing with their grandparents, aunts and uncles regularly is both comforting and demanding. Their grandparents’ notion of what is right is very different from theirs.

It is harder for my teenager, Ranju, who goes to a school that is no different from an American private school. Ranju wears Western clothes that she buys online or during trips abroad: typical teenage wear from Target or Gap. Occasionally, my sari-clad mother will tell her not to wear such “tight and skimpy clothes.” My dad will admonish her for going out to parties “at night.”

“Why can’t you go out with friends during the day?” he will ask. “Why don’t you go to lunch instead of to nightclubs?”

My mother-in-law will offer to massage their hair with coconut oil so that it grows long and lustrous. She will encourage them to speak Tamil, our mother tongue. This is all very nice once in a while, but when the advice, admonitions and loving instructions are constant, it gets wearying. I sympathize with my daughters when both grandmothers and assorted aunts hover around with food, oil, clothes, dos and don’ts, but I also expect them not to be rude to elders.

I would like to say that this dance of voices is an Eastern thing, but I am not sure that it is true. Girls in developing countries face enormous pressure to conform to the norms set by elders in their villages and towns. But I also imagine that a 16-year-old girl in Memphis who lives amid a close-knit extended web of family and friends has a nodding acquaintance with emotional expectations.

My girls are slowly learning to push back without being rude. When my mother-in-law brings in coconut oil the day before a party or event, Ranju will laugh, give her a hug and say, “Tomorrow.” She may joke about its strong smell. Jokes work to defuse and distract, she has found. The affection she gets from grandparents is wonderful and boundless, but it also clouds boundaries of self and personal space.

Occasionally, Ranju comes to me in a bad mood. “Can’t you tell them to lay off?” she asks. That’s when I give her a hug. “Think of it as practice for life,” I say. “If you can say ‘no’ to persistent Indian grandparents, you can say ‘no’ to anyone.”

So Ranju learns to look for the tricky balance between being assertive and courteous. She will tell her 81-year-old grandfather that although he thinks it is weird that she goes out every Saturday night, her school friends actually party four times a week. By asking for one weekend night out, she is actually compromising for the family and not straying off the path. She eats almonds; she oils her hair because they nag her to.

Young Malu wants to be a pastry chef. Ranju wants to be an entrepreneur. Both their ambitions usually get shot down at family weddings.

“Become a doctor,” an uncle will say. “It is more respectable than a pastry chef.”

“Don’t start your own business,” an aunt will tell Ranju. “It’s too risky.”

All these voices mean well, but they mean their version of well. Ranju and Malu are learning to accept the affection while asserting their independence.

It isn’t always easy or graceful. When my girls whine about “being forced” to wear Indian saris for family weddings, I get irritated. I call them drama queens. I have (and I say this sheepishly) used Malala and her cohorts as a tool as well. I talk about girls whose basic rights and choices are dictated by others, and here are my girls making a fuss about wearing a sari. But I do understand that they feel constrained.

They say that it takes a village to raise a child. But for girls, particularly in the East, it is also a matter of silencing voices and swimming against the village tide.

Shoba Narayan is the author of the memoir “Return to India.”

Bad History Mars Indian Movie On Rajiv Gandhi’s Assassination

Divyakant Solanki/European Pressphoto Agency Demonstrators in Mumbai, Maharashtra, demanding a ban on the film “Madras Cafe” on Aug. 22.

The movie “Madras Cafe,” which opened in India and elsewhere in the world recently, seeks to chronicle the Sri Lankan civil war through the events leading up to the assassination in 1991 of former Prime Minister Rajiv Gandhi of India.

In the southern state of Tamil Nadu, protests from several Tamil groups, who share strong ethnic and cultural ties with the Tamil minority of Sri Lanka, claimed that the film portrays Tamils in poor light. The protests virtually ensured that the movie was not released in the state. The Tamil Nadu government, in failing to assuage these objections, has once again given credence to an illusory faction’s hollow right not to be offended. But free speech issues apart, “Madras Cafe” raises larger ethical questions and illustrates how Bollywood hobbles when it attempts political subjects.

“Madras Cafe” may be brave, taut and original by Bollywood standards, but it glosses over several significant specifics of the Sri Lankan civil war. It serves, at best, as a morally disinterested record of the plotting and the consequent assassination of Mr. Gandhi and, at worst, as contemptuously partisan, effectively ignoring the plight of Sri Lanka’s Tamil minority.

The central question that “Madras Cafe” raises is whether a most gruesome war of huge political substance can be turned into an impassive drama that eschews the fuller facts. The movie is, in the words of its director, Shoojit Sircar, “fiction adapted from history.” Actor John Abraham, who also co-produced the movie, plays Vikram Singh, an Indian intelligence agent, and the story follows the Liberation Tigers of Tamil Eelam (referred to as the L.T.F. in the film) as they plot to assassinate Mr. Gandhi (referred to simply as the “Ex-P.M.”).

The movie opens in Kasauli in the northern state of Himachal Pradesh, with a slovenly and drunk Agent Singh waking up to television news of the death of Sri Lanka’s prime minister, reportedly at the hands of the L.T.F. Mr. Singh, visibly upset, walks into a church with a half bottle of rum in hand. He then tells a priest the story of how India’s former prime minister also suffered a similar fate at the hands of the L.T.F., due to no fault of his own.

The narration begins with a sequence of shots aimed at setting the historical background. According to the movie, 1989 was the most crucial phase in Sri Lanka’s history. An ethnic conflict between the Sinhalese majority and the Tamil minority had apparently taken a turn for the gruesome with thousands of Tamil civilians losing their lives. Jaffna was stripped of basic requirements, and the Tamil population was slowly displaced.

Many Tamils took to joining Anna Bhaskaran (standing in for Velupillai Prabhakaran, who was killed by the Sri Lankan military in 2009) and his L.T.F., which was fighting for an independent Tamil land. And this, the viewer is told, was the genesis of a bloodbath, which saw Tamil refugees flood India. The Indian government concerned by the situation decided to broker an accord with Sri Lanka, and sent a peacekeeping force. But Mr. Bhaskaran rejected the pact. He saw the peace force as antithetical to Tamil interests, and decided to wage a brutal guerrilla war.

In so narrating the story, “Madras Cafe” ignores decades of history preceding the Indian government’s direct intervention. It will have you believe that it was the L.T.F’s rise in the late 1980s, and its demand for a free Tamil country, which prompted the most gruesome phase of the civil war.

Strdel/Agence France-Presse â€" Getty Images Actor John Abraham and actress Nargis Fakhri ahead of a screening of their film “Madras Cafe” in Mumbai, Maharashtra, on July 11.

Madras Cafe doesn’t even mention “Black July” in 1983 when a weeklong riot by Sinhalese mobs was incited by the killing of 13 Sri Lankan military personnel by the Tamil Tigers. The riot, which went unpunished, even finding the implicit support of the Sri Lankan government, according to reports, led to the deaths of thousands of innocent Tamils, causing more than 100,000 to flee the island for refuge in India. The event is widely believed to be the trigger for the full-blown civil war in the country, which in 26 years would kill more than 100,000 people.

In the years that immediately followed “Black July,” the Indian government led by then Prime Minister Indira Gandhi armed and financed the Tamil rebels. The practice continued under her son Rajiv’s government. In fact, on June 5, 1987, the Indian Air Force dropped tons of food and medicine by parachute to Jaffna, the de facto Tamil capital, which was under siege by Sri Lankan forces.

In tracing Indian intervention in Sri Lanka to 1989, by ignoring earlier history, “Madras Cafe” misrepresents a conflict of enormous import. It overlooks both the Indian peacekeeping force’s alleged atrocities against Sri Lanka’s Tamil minority and the genocidal violence sponsored by the Sri Lankan government that saw at its culmination more than 40,000 Tamils killed in the final months of the war, which ended in May 2009.

Similarly, while the Indian intervention is shown as necessary and unavoidable, its legacy, which climaxed with the virtually apocalyptical and chilling battles in 2009, captured with searing detail in Channel 4’s documentary film, “Killing Fields,” is left unexplained.

Had “Madras Cafe” merely sought to record the assassination of Mr. Gandhi, one could have looked beyond these gaping gaps. But Mr. Sircar’s ambition is decidedly loftier. “The bigger message” of the film he told AFP, “is that in a civil war, civilians suffer the most.” Yet, the movie seems to suggest no such thing.

Time and again, in Madras Cafe, we are showed Tamils ruthlessly murdered at the hands of an arcane force. Equally, we see Tamils as part of the L.T.F. killing with wanton abandon. Its leader Bhaskaran is constantly described as an “ideologue.”

But the origins of Bhaskaran’s supposed ideology â€" triggered, among other things, in the 1970s when the Sri Lankan government introduced the policy of standardization to rectify the low numbers of Sinhalese being accepted into university in Sri Lanka â€"and the makings of the L.T.F. are left to imagination.

Both the battle at the root of the Tamil struggle for independence â€" caused, among other things by the burning, allegedly by Sinhalese police officers, in 1981 of more than 100,000 old and rare Tamil books at the Jaffna Public Library â€" and the Sri Lankan government’s role in violently suppressing any struggle for independence find no mention in the movie.

According to Mr. Sircar, he has “used real references, portrayed rebel groups, revolutionary freedom fighters, Indian Peace Keeping Forces [and] shown how India got involved [in] the chaos”. But history is not what Madras Cafe is based on, but what’s overlooked, and often discounted.

India, if you believed “Madras Cafe,” had little choice but to intervene in Jaffna. On the contrary, the Indian Peace Keeping Force’s participation, imposed by the peace accord signed by Mr. Gandhi, was a rash decision, whose consequences are still reverberating.

The Indian Peace Keeping Force’s participation in atrocities in the region is also outside the domain of Mr. Sircar’s story. It is widely believed that in the course of its pursuit of suspected Tamil militants the Indian Peace Keeping Force  tortured prisoners with electric shock treatments and attacked Tamilian civilians arbitrarily. An Amnesty International report documents the tremendous impunity showed by India’s peacekeeping forces in Sri Lanka.

Even the movie’s professed central theme, the plot to assassinate the former prime minister, is short on details and sounds almost laughably simple and prosaic. The crux of what might have prompted Mr. Bhaskaran to design the act is treated with a baffling insouciance.

The audience is told that the L.T.F. is upset at the peace accord, which sees the Indian Peace Keeping Force arrive in a pathetically stricken Jaffna. A return to power for the former prime minister would seemingly run counter to the L.T.F.’s interests. So a plan is hatched to assassinate him in concert with an unknown business syndicate. An insider in India’s intelligence unit helps these ideas come to fruition: he keeps the L.T.F. advised of the Indian government’s tactics well in advance of their enforcement.  The L.T.F., having trained a few members to kill the former prime minister by detonating a suicide bomb, achieves its end in spite of Agent Singh’s heroic, nearly single-handed efforts to thwart the conspiracy.

The events, although supposedly fictional, run counter to the unraveling of the plot to kill Mr. Gandhi by India’s Special Investigation Team. In the charge sheet filed by the Special Investigation Team, 41 people were named as accused, and as having conspired to kill Mr. Gandhi. The Special Investigation Team did not mention an inside job, or the involvement of any operative of the Research & Analysis Wing in the conspiracy, a feature that comprises a major part of the movie’s plot.

While the suicide bomber and her immediate cohorts are depicted as robotic creatures, shorn of ideology, other significant operatives curiously find no mention. Pottu Amman, who had according to the Special Investigation Team “designed and arranged the execution of the objective of the criminal conspiracy,” and Akila, who had “planned and arranged the objective of the conspiracy,” are absent from the movie.

But what’s most striking and disturbing is the complete eschewal in the film of Sri Lanka’s role in the conflict. Today, we know how the civil war ended, and what created its foundations. In irresponsibly abjuring any interest in such events, Mr. Sircar has turned a conflict of astounding purport into a morally impersonal drama.

Suhrith Parthasarathy is a lawyer and journalist based in Chennai. He can be reached on Twitter @suhrith

Why India’s Economy Is Stumbling

WASHINGTON â€" FOR the past three decades, the Indian economy has grown impressively, at an average annual rate of 6.4 percent. From 2002 to 2011, when the average rate was 7.7 percent, India seemed to be closing in on China â€" unstoppable, and engaged in a second “tryst with destiny,” to borrow Jawaharlal Nehru’s phrase. The economic potential of its vast population, expected to be the world’s largest by the middle of the next decade, appeared to be unleashed as India jettisoned the stifling central planning and economic controls bequeathed it by Mr. Nehru and the nation’s other socialist founders.

But India’s self-confidence has been shaken. Growth has slowed to 4.4 percent a year; the rupee is in free fall, resulting in higher prices for imported goods; and the specter of a potential crisis, brought on by rising inflation and crippling budget deficits, looms.

To some extent, India has been just another victim of the ebb and flow of global finance, which it embraced too enthusiastically. The threat (or promise) of tighter monetary policies at the Federal Reserve and a resurgent American economy threaten to suck capital, and economic dynamism, out of many emerging-market economies.

But India’s problems have deep and stubborn origins of the country’s own making.

The current government, which took office in 2004, has made two fundamental errors. First, it assumed that growth was on autopilot and failed to address serious structural problems. Second, flush with revenues, it began major redistribution programs, neglecting their consequences: higher fiscal and trade deficits.

Structural problems were inherent in India’s unusual model of economic development, which relied on a limited pool of skilled labor rather than an abundant supply of cheap, unskilled, semiliterate labor. This meant that India specialized in call centers, writing software for European companies and providing back-office services for American health insurers and law firms and the like, rather than in a manufacturing model. Other economies that have developed successfully â€" Taiwan, Singapore, South Korea and China â€" relied in their early years on manufacturing, which provided more jobs for the poor.

Two decades of double-digit growth in pay for skilled labor have caused wages to rise and have chipped away at India’s competitive advantage. Countries like the Philippines have emerged as attractive alternatives for outsourcing. India’s higher-education system is not generating enough talent to meet the demand for higher skills. Worst of all, India is failing to make full use of the estimated one million low-skilled workers who enter the job market every month.

Manufacturing requires transparent rules and reliable infrastructure. India is deficient in both. High-profile scandals over the allocation of mobile broadband spectrum, coal and land have undermined confidence in the government. If land cannot be easily acquired and coal supplies easily guaranteed, the private sector will shy away from investing in the power grid. Irregular electricity holds back investments in factories.

India’s panoply of regulations, including inflexible labor laws, discourages companies from expanding. As they grow, large Indian businesses prefer to substitute machines for unskilled labor. During China’s three-decade boom (1978-2010), manufacturing accounted for about 34 percent of China’s economy. In India, this number peaked at 17 percent in 1995 and is now around 14 percent.

In fairness, poverty has sharply declined over the last three decades, to about 20 percent from around 50 percent. But since the greatest beneficiaries were the highly skilled and talented, the Indian public has demanded that growth be more inclusive. Democratic and competitive politics have compelled politicians to address this challenge, and revenues from buoyant growth provided the means to do so.

Thus, India provided guarantees of rural employment and kept up subsidies to the poor for food, power, fuel and fertilizer. The subsidies consume as much as 2.7 percent of gross domestic product, but corruption and inefficient administration have meant that the most needy often don’t reap the benefits.

Meanwhile, rural subsidies have pushed up wages, contributing to double-digit inflation. India’s fiscal deficit amounts to about 9 percent of gross domestic product (compared with structural deficits of around 2.5 percent in the United States and 1.9 percent in the European Union). To hedge against inflation and general uncertainty, consumers have furiously acquired gold, rendering the country reliant on foreign capital to finance its trade deficit.

Economic stability can be restored through major reforms to cut inefficient spending and raise taxes, thereby pruning the deficit and taming inflation. The economist Raghuram G. Rajan, who just left the University of Chicago to run India’s central bank, has his work cut out for him. So do Prime Minister Manmohan Singh, also an economist, and the governing party, the Indian National Congress. These steps need not come at the expense of the poor. For example, India is implementing an ambitious biometric identification scheme that will allow targeted cash transfers to replace inefficient welfare programs.

India can still become a manufacturing powerhouse, if it makes major upgrades to its roads, ports and power systems and reforms its labor laws and business regulations. But the country is in pre-election mode until early next year. Elections increase pressures to spend and delay reform. So India’s weakness and turbulence may persist for some time yet.

Arvind Subramanian, a senior fellow at both the Peterson Institute for International Economics and the Center for Global Development, is the author of “Eclipse: Living in the Shadow of China’s Economic Dominance.”

A version of this op-ed appears in print on August 31, 2013, on page A19 of the New York edition with the headline: Why India’s Economy Is Stumbling.

Rupee Drops, and Outlook Grows Darker for India

Santosh Verma for The New York Times

Counting rupees at a phone store in Mumbai. The rupee has fallen 8.1 percent in the last month.

MUMBAI, India â€" The statistical evidence is piling up that India’s economy may be in even worse shape than had been thought.

India’s economy slowed in early summer to its weakest pace since the bottom of the global economic downturn in 2009, government statistics released Friday evening showed.

The Central Statistics Office in New Delhi said that the economy grew 4.4 percent in the quarter ended June 30, well below economists’ expectations of 4.8 percent. The quarter was the weakest since output grew 3.5 percent in the quarter that ended March 31, 2009.

The accumulating signs of economic distress â€" slower growth, a widening current-account deficit, higher oil prices and rising inflation in general â€" suggest that the monthlong fall of the Indian rupee in currency markets may be a symptom of fundamental troubles in the Indian economy and not just part of the broader difficulties experienced by Asian emerging market currencies in recent weeks.

Hints that the Federal Reserve in the United States may soon shift to a tighter monetary policy have prompted global investors to shift billions of dollars out of financial markets from São Paulo to Jakarta to Mumbai, eroding the value of local currencies in developing economies. But the Indian rupee has fallen the fastest of any emerging market currency in the last month, down 8.1 percent. Broader investor disenchantment with emerging markets has been compounded here by worries about India’s economy, the third-largest in Asia after China’s and Japan’s.

Manufacturing and mining have been hit the hardest. A court-ordered halt to most iron ore mining across India for environmental reasons has hurt steel and other sectors; state governments have been raising taxes on the sector, and broader demand has begun to falter.

“The fact is, yes, the manufacturing sector has slowed down,” said Raj K. Singh, the chairman and managing director of the Bharat Petroleum Corporation, an oil refining and marketing company that is two-thirds owned by the Indian government and is one of the country’s largest businesses.

The data was released after stock market and currency trading had ended for the day, despite government promises to stay with the regular Friday morning release. After a week of considerable volatility, the rupee and the Mumbai stock market both had showed modest gains earlier Friday.

India enjoyed annual growth of 8 to 9 percent in the years leading up to the global financial crisis but has struggled to reach 6 percent since then, despite heavy government spending and large fiscal and trade deficits.

From corner stores to corporate boardrooms, the consensus in Mumbai these days is that stagnation may continue over the next few months, although almost no one expects a steep downturn.

Sitting in his office on Friday morning in front of an abstract Indian painting in blues and yellows, Mr. Singh voiced concern about a 7.2 percent drop in nationwide diesel consumption during the first three weeks of August from a year ago. Nationwide diesel consumption was also down 5.9 percent in July from a year ago.

But heavy monsoon rains have limited the need for diesel in irrigation pumps, making the comparison less clear, Mr. Singh cautioned. Rohit Dawar, the top diesel demand expert at the Petroleum Ministry in New Delhi, said in a telephone interview that diesel consumption had been artificially inflated in July and August last year by a peculiarity in government fuel subsidies, since removed, that temporarily made it cheaper to burn diesel instead of other fuels in industrial boilers.

Even allowing for all of these factors, however, “there is a slight slowdown” in diesel demand recently, Mr. Dawar said.

Plentiful monsoon rains, a key indicator for the Indian economy for thousands of years, have produced lush fields that could yet help stabilize broader measures of the economy in the coming months and forestall a steeper slowdown. While World Bank data show that value added in agriculture is only one-sixth of the economy these days, a good harvest could still play an outsize role in limiting recent increases in food prices.

Inflation will probably remain a problem, however, given that India relies almost entirely on imported oil, which becomes more expensive with each drop of the rupee. So important is oil to India’s trade deficit that desperate bidding for scarce dollars by Indian refiners helped drive the rupee briefly to a record low on Wednesday, before the Reserve Bank of India stopped the rout that evening by arranging to transfer dollars from its reserves to oil importers.

“Prices are rising for everything â€" petrol is more expensive, vegetables are more expensive,” said Bharat Hirji Gada, a local shopkeeper.

India has some advantages compared with European and other Asian countries that have experienced steep economic downturns following currency declines over the last two decades. The biggest advantage may be that the Indian government has long prohibited borrowing in foreign currencies by poor or middle-class households and by small and medium-size businesses.

Foreign debt has been concentrated among blue-chip companies and wealthy individuals. Many of these loans are to borrowers whose revenue is largely denominated in dollars, limiting their currency exposure, said Haseeb A. Drabu, the chief economist for the Essar Group, one of India’s heavy industry giants.

“The bulk of it would be hedged,” he said.

Neha Thirani Bagri contributed reporting.

A version of this article appears in print on August 31, 2013, on page B1 of the New York edition with the headline: Rupee Drops, And Outlook Grows Darker For India.