Indian Finance Minister Pranab Mukherjee Sunday expressed concern over the depreciation of the rupee.

Speaking to the media in Kolkata, Mukherjee said that the euro zone crisis had dragged down the rupee and the government was working towards resolving the issue.

It is a matter of great concern. We are watching the situation. The Centre is not (sitting) idle. We are trying to resolve (the issue), Mukherjee said, according to a PTI report.

He added that the emerging markets like Brazil were facing the same situation due to the euro zone crisis.

The rupee has been falling steeply in recent weeks and has hit the recent all-time-low of 54.91 against the dollar. This, coupled with the volatile market and foreign fund out flow, is weighing heavily on the fragile Indian economy.

The government is also dealing with multiple issues over the economy as the country's inflation went up in April while the deficit in fiscal and current accounts widened further.  Experts believe that though India's Central Bank has intervened in the Forex market to defend the rupee through fiscal measures, the impact has remained negligible, as it was not backed by government policies.

Investors and financial bodies have blamed the government for not going ahead with reforms because of political pressures and this has negatively impacted the economy and the rupee.

The alliances are not allowing the central government to take any decision. India needs huge investments in infrastructure, roads, building, power and many sectors. But because of policy paralysis, the government is neither able to reduce fiscal deficit nor able to invest in infrastructure, Bhagirath Merchant, chairman of Tarragon Capital Advisors, told the DNA.

However, the UPA government has been refuting the charges. 

Planning Commission Deputy Chairman Montek Singh Ahluwalia Saturday dismissed concerns about the policy paralysis in the country.

Ahluwalia, who was in New York to participate in G-20 Sherpas meeting, said that the assumptions that the government was not interested in attracting foreign investment to the country was not valid.

The economy grew by 9 percent for five years with the existing laws. It is not as if unless we change something that growth rate cannot happen. I am not saying we should not change. We should change, he told PTI when asked about the impact of policy paralysis in India over investments.