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."