Asian shares and currencies were also hit on concerns over possible US military intervention in Syria.[Break]
The rupee, one of Asia´s worst-performing currencies this year, fell to a new lifetime low of 65.71 rupees to the dollar in morning trade, slipping past its previous low of 65.56 on August 22.
Finance Minister P. Chidambaram insisted at a news conference in New Delhi that India can finance the food bill at the same time as meeting its target for cutting its record current account deficit -- the broadest measure of trade -- whose level has unnerved foreign investors.
"We have done our sums -- there is enough money to provide for the food security bill" and after that to meet the deficit target, "which is a red line that will not be breached", Chidambaram said.
The food scheme, which economists say would be a strain on government finances at an annual cost of $18 billion, comes at a time of decade-low growth.
The food legislation, a flagship programme of the ruling Congress party, is intended to "wipe out" endemic hunger and malnutrition in the aspiring superpower.
Chidambaram said that the rupee was now "undervalued" against other currencies and India would have to be "patient, be firm -- do whatever is required to be done -- and the rupee will find its appropriate level".
The benchmark Sensex index also slid, trading down 2.56 percent or 477.79 points to 18,080.34 points in early afternoon.
"Every emerging market is challenged today so India is also challenged, and the impact is felt both on the equity market as well as the currency market," Chidambaram told reporters.
The bill is designed to provide food grains to nearly 70 percent of the population, or 800 million people, for as little as one rupee per kilo.
India´s central Reserve Bank of India has previously warned that increased public spending for the food bill could deepen the government´s deficit and stoke already elevated inflation.
The rupee, like currencies of other emerging markets, has also fallen on fears of foreign fund outflows as the US economy picks up and the US Federal Reserve rolls back its stimulus programme.
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