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India’s currency resumed its headlong plunge on Friday, stoking concerns that the world’s fastest-growing major economy could be heading for a slowdown.

The rupee crossed 74 rupees to the US dollar for the first time ever, after the country’s central bank surprised markets by holding off on raising interest rates. The currency recovered slightly later in the day.

The Reserve Bank of India (RBI) decided against hiking rates for the third time this year despite expectations that it would act to tame inflation caused by rising oil prices and the crashing currency, which makes imports more expensive.

The Indian rupee has fallen around 15% against the surging dollar this year, making it one of the world’s worst performing currencies.

The Indian government has tried in vain to stop the slide. It recently made it easier for foreign investors to buy rupee bonds issued by Indian companies and raised tariffs on imported goods like washing machines and diamonds, measures designed to reduce the flow of money out of the country.

India’s stock market has suffered along with the rupee. The country’s benchmark index, the Sensex, has dropped more than 8% in the past month.

India's central bank, the Reserve Bank of India, held off raising interest rates, triggering a new fall in the rupee.
PUNIT PARANJPE/AFP/Getty Images
India's central bank, the Reserve Bank of India, held off raising interest rates, triggering a new fall in the rupee.

India’s economic growth has accelerated this year, hitting 8.2% in the most recent quarter. But as one of the world’s biggest energy importers, it is feeling the pain of rising oil prices.

India is also one of several emerging markets that have been hit hard by the strengthening US economy, which has pushed up the dollar. Bond yields in the United States rose to their highest levels in years on Thursday, in anticipation of interest rate hikes by the US Federal Reserve.

“A large number of international factors … have had a significant impact in markets across the world, and we’ve also been impacted because of that,” India’s Finance Minister Arun Jaitley said Thursday, while announcing a cut in taxes on fuel.

Analysts say more rate hikes — and more problems for the Indian economy — are likely.

“India delivered punchy growth in the second quarter, but things may slow from here,” economists at HSBC wrote in a note. “Rising oil prices are a particular headache … and rates may need to rise further.”

Although it held off on a hike this time around, the RBI adopted a stance of “calibrated tightening.”

“This suggests that the hiking cycle is not over just yet,” Shilan Shah, India economist at Capital Economics, said in a note Friday. “It would appear that the [central bank] felt it prudent to wait to assess the impact of the first two hikes before moving again.”

In addition to the existing headwinds to its economy, India could soon face sanctions from the United States over a defense deal it signed with Russia on Friday.

Russian President Vladimir Putin signed the $5 billion missile deal in New Delhi, making India vulnerable to economic retaliation from Washington. The Trump administration imposed sanctions on China last month for a similar defense pact.

CNN’s Ivana Kottasova, Paul LaMonica, Manveena Suri and Steve George contributed to this report.