India may further raise caps on foreign direct investment to spur more inflows of funds, as part of efforts to kickstart the sluggish economy before next year's general elections, the finance minister said Thursday. Finance Minister P. Chidambaram also appealed for calm over the rupee, saying steps have been taken to halt the slide in the currency, which hit new lifetime lows this week, in part on concerns over the Indian economy.

India's industrial output grew by a worse-than-expected two percent in April, official data showed on Wednesday, suggesting that the recovery of Asia's third-largest economy remains elusive. The two percent year-on-year output growth of India's factories, mines and utilities undershot market expectations of a 2.4 percent rise and was down from an upwardly revised 3.4 percent jump the previous month.

India's rupee hit a new lifetime low against the dollar Tuesday as the government said authorities would take "action as warranted" to stem the fall. The rupee has been hit by speculation that the US Federal Reserve will cut back on asset purchases which have fuelled flows into emerging markets and as well as by growing concern about India's economic weakness. "A large part of the rupee's fall is due to dollar strength," the finance ministry's chief economic adviser Raghuram Rajan told reporters in New Delhi, adding that there was "no sense of panic".

Shares in India's ICICI, Axis and HDFC banks fell on Tuesday after the central bank found them guilty of violating guidelines relating to customer verification and anti-money-laundering. The three banks were probed for suspected laundering after a sting operation by news outlet Cobrapost in March and April exposed alleged business irregularities at Indian financial institutions.