India's rupee, Asia's worst performing currency this year, could be bound for 'uncharted waters,' analysts say, as fears about eurozone debt and a slowing economy pump demand for the dollar.

The rupee slipped to 51.20 per dollar on Friday -- a 32-month low -- with no sign that it has bottomed out.

"There's nothing preventing the rupee heading into uncharted waters. We don't really know where it will stabilise against the dollar," Abheek Barua, chief economist of India's HDFC bank, told AFP.

The rupee has fallen 15 per cent since July on worries over the debt crisis and concern about deceleration in Asia's third-largest economy, sparked by 13 rate hikes that have failed to curb near double-digit inflation.

Former chief Indian government economic advisor Shankar Acharya has warned the economy could grow by under seven percent in the financial year ending March 2012 -- down from 8.5 per cent last year.

"The currency is suffering from global risk aversion which is likely to increase rather than decrease as well as from weakening domestic macroeconomic fundamentals," Dariusz Kowalczyk, economist at Credit Agricole, told AFP.

Money has been flowing out of India into US assets such as treasury bills -- seen as safe bets in times of crisis.

The falling rupee is bad news for India, aggravating inflation and pushing up the price of imports.

India is a net importer of foreign goods, with one-third of the total made up of crude oil imports used to power the energy-hungry nation.

Other imports include steel, coal and rubber, driving up costs for manufacturers that will be passed on to consumers.

While exports will be cheaper, currencies of other countries have also fallen against the dollar, although not as much, diminishing India's advantage.

India's central bank has expressed hesitation about intervening to support the rupee, suggesting it may not even have the resources.

Reserve Bank of India deputy governor Subir Gokarn said it would be a 'risky strategy' if the bank were to 'try and resist or try and do something for which we do not have a capacity'.

India's foreign exchange reserves of around $320 billion are just one tenth of neighbouring emerging market giant China’s.

Traders say the central bank may be exacerbating pressure on the rupee by advertising its reservations.

"These defeatist statements aren't helping, it's like open season on the currency," said a Mumbai currency trader.

Laurence Balanco, technical currency analyst at investment house CLSA told India's CNBC TV-18 the rupee could slide to 58 against the dollar if it crashes through the 52 mark.

Not only is the rupee the worst performer among major Asian economies, so is India's share market which has fallen over 21 per cent since the start of 2011. The rupee touched a record peak of 39.40 to the dollar in February 2008.

It began unravelling when Lehman Brothers collapsed later that year, triggering the last global financial crisis, and struck its lowest level of 52.20 rupees to the dollar on March 2, 2009 when global stock markets dived.

Diminishing India's appeal to foreign investors and piling pressure on the rupee have been a slew of government corruption scandals, accusations of 'policy paralysis' and a worsening fiscal situation with the administration overshooting borrowing targets for the second half of the year by 32 per cent.

"On a bad day one often wonders how it (India) functions at all, let alone how it evolved to be Asia's second-fastest growing economy," investment house CLSA Asia Pacific Markets remarked in a sharply worded critique of the government's handling of the economy.