( CNN ) -- Amid a falling currency , slumping factory output , lackluster investment and weak orders , India 's Prime Minister Manmohan Singh looked desperately for at least some chinks of light in the economic gloom . Addressing parliament , Singh struck out for the one silver lining left to his battered economy -- the falling rupee will boost exports . `` To some extent , depreciation can be good for the economy as this will help to increase our export competitiveness and discourage imports , '' Singh said last week in a long address to lawmakers on the crisis in the Indian economy . `` Over the next few months , I expect the effects of this to be felt more strongly , both in exports and in the financial position of exporting sectors . This in itself would correct the current account deficit to some extent . '' Whether investors will share his confidence is the question economists are asking themselves as the axles come loose on India 's economic juggernaut . Slowing growth . The Purchasing Managers Index grew just 4.4 % in April-June , it 's slowest pace for four and a half years . `` The August reading was grim , '' HSBC chief economist for India Leif Eskesen said in a note . `` Coupled with the July reading it seems clear that the economy is continuing to slow and that last week 's April- June GDP number was not the bottom . '' He said the recovery in growth would prove to be a drawn-out affair and would be tainted by the lingering balance of payment challenges . `` Politics may get in the way of meaningful progress on structural reform , '' he said . `` Unfortunately , we think the slowdown has further to go , which presents greater challenges for policymakers as they try to stabilize the currency . '' The threat of a U.S. strike on Syria has put pressure on oil prices and on gold -- two of India 's biggest dollar-indexed imports -- in the short-term , but analysts say that India 's currency woes can only be stabilized by addressing long-term fundamentals . India , they say , could follow three scenarios , none very attractive . Let the rupee fall . It could allow the currency to fall further , boosting exports and helping close the current-account deficit , as Singh 's speech suggested . Nevertheless , with a small manufacturing base mired in red tape , analysts say it does not have the critical mass to respond quickly . With balance of payments taking time to turn around , investors would likely panic in the meantime further depressing business . A weaker currency would also likely stoke inflation , increase the government subsidies on fuel and also its borrowing . Boost interest rates . Indonesia and Brazil last month took measures to protect their currencies by tweaking interest rates -- a response in large measure to improving prospects for the U.S. economy where the Federal Reserve looks likely to begin winding in the purchase of bonds . If India followed suit , Indian industry -- already in bad shape -- would suffer and increase the possibility of bad loans at banks too . Corporate earnings decline would slam equity investors who currently have about $ 200 billion invested in listed shares . A credit crunch , say analysts , would make things worse . Borrow less money . Government borrowing is running at about 7 % of GDP , according government figures , fueling excess demand and widening the current account deficit . With its appetite for lavish and populist government programs , spending cuts are difficult . It 's latest ambitious food program -- the $ 25 billion annually food security bill -- is likely to impact the economy heavily . But economists are saying that once all the provisions of the bill are priced in , it will cost much more . Sajjid Chinoy of JP Morgan told CNN the cost could easily go up a further half a percentage point of GDP . `` If you look at an incremental cost of 0.5 % , the total cost would then be 1.5 % of GDP which is large by any standard , '' he said . Raise taxes . Like Pakistan , India may have to look at raising tax revenues . With just 3 % of Indian paying income tax , analysts say that tax increases would have to fall on the formal economy which is already taking a big hit in the current economic climate . Rahul Chadha , co-chief investment officer at Mirae Asset Global Investments , told CNN the rupee 's immediate fate , however , lies in the hands of the central bank . `` I think this is the dilemma of the central bank , '' he said . `` We 've seen this half-hearted attempt to stabilize the currency -- they came at it from different levels . But because it was half-hearted and the currency depreciated after that we have seen panic reaction from corporates and institutional investors . `` Clearly at a certain level the market has to get convinced that the central bank has enough power fire power to stabilize the currency . Once the market gets that kind of conviction , you will see the rupee again appreciating by 7 % to 8 % very quickly . ''
India looks for the upside to the rupee crisis - that it will boost exports . Analysts say its industrial base is too small and too bound up in red tape to respond quickly . The government has been trying to get a grip on inflation by raising interest rates but Government borrowing is fueling excess demand and widening the current account deficit .