Chakravarthy Rangarajan, the Prime Minister's top economic adviser, said last month one option to shore up the rupee was a deposit programme to lure funds from citizens based overseas.
"The situation is quite worrisome," said Dharmakirti Joshi, Mumbai-based chief economist at Crisil, the local unit of Standard & Poor's.
"You have to increase the supply of dollars. A lot of foreign-currency convertible bonds and other payments are due and it does create stress on those who have borrowed abroad."
Indian companies face a record US$5.3 billion ($6.7 billion) of maturing foreign-currency debt this year, data compiled by Bloomberg shows.
At the sovereign level, Fitch Ratings cut its outlook for India to negative on June 18, joining S&P in signalling the country is at risk of losing its investment-grade status.
The rupee reached an all-time low on June 22 of 57.3275 per US dollar.
While most emerging-market currencies have retreated in recent months as Europe's crisis prompted investors to flee riskier assets, the rupee has underperformed as India's government failed to rein in its budget deficit and economic reforms stalled.
The currency slumped 2.9 per cent last week, its biggest loss since September.
Joshi said that besides the deposit programme, relaxing limits on foreign investment could be considered to halt the rupee's slide.
A variety of dollar-denominated products, including bonds, could be looked at, HSBC Holdings analysts wrote in a June 22 research note.
"This would only slow rupee weakness and not change the overall direction," HSBC currency analysts led by Paul Mackel in Hong Kong wrote in the note.
"For the rupee to strengthen more meaningfully and sustainably against the dollar, the Government needs to do more than short-term patch work.
"It needs to undergo the necessary structural reforms."
Prime Minister Manmohan Singh's Administration has seen its agenda stymied by opposition from its own coalition allies, and last year suspended a plan to allow Wal-Mart Stores and other foreign companies to buy majority stakes in Indian multi-brand retailers.
An anti-corruption bill and proposals to allow foreign direct investment in pensions have also been shelved.
The approaching personnel shift in India's leadership offers an opportunity to reinvigorate the government's agenda.
The rupee's slump has contributed to inflation because India buys 80 per cent of its oil from overseas and pays for supplies in dollars.
- Bloomberg
