The rupee’s previous record low was 56.52, which it hit on May 31.
On the other hand, Brent crude fell to its lowest in 18 months on Thursday at around $92 a barrel.
Here are five facts on why the rupee is falling despite a fall in crude prices:
Current account deficit: The CAD, which arises when the import of goods and services exceed their exports, had touched 4 per cent of GDP at the end of December 2011. Earlier this month, economic affairs secretary R. Gopalan had said that declining crude prices were good news for India as it would help contain the current account deficit.
Fiscal deficit: India's fiscal deficit during the 2011-12 fiscal year that ended in March was Rs 5.2 trillion, or equivalent to 5.9 per cent of the GDP. Finance minister Pranab Mukherjee has said that the government needs to bring this down to 5.1 per cent, in line with Union Budget estimates. A fiscal deficit arises when the government’s expenditures exceed its revenues. Last month the government had announced a series of austerity steps to rein in this deficit, including a 10 per cent cut in non-plan expenditure for 2012-13.
Poor monsoon: Monsoon has not been up to the mark in the country so far. After arriving late by almost a week, rainfall was 36 per cent below average in the first week. Rains have covered almost half of the country today, showing signs of a pick-up after falling short in the first 15 days of the season and easing concerns about the planting of summer-sown crops such as rice, corn, cane, cotton and soybeans. Monsoon rains are vital for agriculture and economic growth, because irrigation covers only 45 per cent of farmland. The farm sector accounts for about 15 per cent of the country's nearly $2 trillion economy.
Low growth prospects: Rating agencies and experts have repeatedly been questioning India’s growth prospects. The latest was ArcelorMittal chairman and CEO Lakshmi Mittal, who said the country was potentially condemning millions to remain in poverty by not helping industrialization. Earlier, Wipro chief Azim Premji recently told global investment analysts that the country was leaderless, while Infosys co-founder Murthy said India was in a sorry state of affairs. Rating agency S&P earlier this month said that India may become the first “fallen angel” among BRIC countries, saying the country could lose investment-grade rating. Earlier this week, Fitch downgraded India’s growth outlook to negative, citing "heightened risks that India's medium- to long-term growth potential will gradually deteriorate if further structural reforms are not hastened". Last month, global banking giant HSBC had called India a "gasping elephant". India's economic growth rate slowed to a nine-year low, in March quarter at 5.3 per cent and 6.5 per cent for 2011-12. The decline in growth was witnessed in almost all segments of the economy, including agriculture, manufacturing, mining and construction.
Weak global scenario: India's exports in March fell for the first time since the 2009 global financial crisis as demand weakened in the United States and Europe, further clouding the outlook for the country's balance of payments. Exports did pick up in April, but only grew 3.2 per cent from a year earlier, and garment, gems and jewellery shipments shrank, highlighting the challenge facing Asia's third-biggest economy in the face of weak global demand.