The Indian currency, which has been under sustained pressure, fell 2.
73 percent to 66.07 against the dollar and stock markets closed down 3.
18 percent after the lower house of parliament passed the Food Security Bill.
India still struggles to feed its population adequately with more than 40 percent of children under five malnourished, which Prime Minister Manmohan Singh describes as a "national shame".
But some economists are concerned about the financial burden of the scheme at a time when investors are pulling out of India and even supporters say it faces problems including a corrupt and inefficient distribution system.
"After providing for the food security bill, we will remain within the limit I have set for myself in the budget," Finance Minister P. Chidambaram told reporters at a press conference in the capital New Delhi.
The legislation, a flagship programme of the ruling Congress party with a budgeted annual cost of about $19 billion, is intended to "wipe out" endemic malnutrit