(MENAFN - The Peninsula) The Indian rupee slumped to a record low of 54.52 against the US dollar yesterday with risk aversion in global markets adding to the pressure, even as Finance Minister Pranab Mukherjee hinted at new austerity measures and maintained that there was no need to panic.

The rupee clawed back marginally from there, but still ended the day at a new closing low of 54.34, against its previous record closing low of 53.92 on Monday. This is the weakest level of rupee recorded so far. The earlier record low of 54.30 against a dollar was hit in mid-December last year.

The partially convertible rupee also hit a record closing low of 54.49 against a dollar. The rupee had closed at 53.78 against a dollar on Tuesday.

Reacting on the development, the finance minister said slide in Indian stock markets and the currency was mainly because of the continued uncertainty in the eurozone, particularly in Greece.

He said the government would soon introduce some austerity measures to bring more fiscal discipline. "I am going to put in some austerity measures. It is important to send a right signal," Mukherjee said while replying to a debate on the Union Budget in Rajya Sabha.

The Indian currency continued to slide despite a series of intervention by the Reserve Bank of India in the markets to control the fall. The RBI last week asked exporters to convert at least 50 percent of their foreign exchange holdings in rupee. The move is estimated to lead conversion of around 3bn of foreign currency, especially the US dollar, into Indian rupee. The central bank has also spent over 20bn in spot-market intervention since September 2011 to check the rupee slide.

The rupee has slumped almost 10 percent since March, the biggest fall among the major Asian currencies. The rupee has weakened due to rising concerns over the country's current account and fiscal deficit. Slowdown in economic growth, high inflation and the perception of policy paralysis has also led to the weakness in the currency.

Continued sell-off by the foreign institutional investors led to almost two percent slump in the country's benchmark indices. The benchmark Sensex of the Bombay Stock Exchange slumped below the 16,000-point mark. The Sensex closed 1.83 percent down at 16,030.09 points. The wide-based Nifty of the National Stock Exchange closed 1.71 percent down at 4,858.25 points.

The latest industrial growth and inflation data has disappointed the market. As per the data released by the Central Statistics Office last week, India's industrial output shrank by 3.5 percent in March due to poor show of manufacturing and mining sectors. It is the first contraction in the factory output since October 2011, when it shrank by 4.7 percent.

Inflation moved up to 7.23 percent in April as compared to 6.89 percent in the previous month, mainly driven by a sharp increase in the prices of food items, according to data released early this week by the ministry of commerce and industry.

Traders said they expected the rupee to fall further in coming days. "The Indian government needs to stop the blame-game and take some measures to tackle the situation," said Abhishek Goenka, chief executive of India Forex, a consultancy firm.

"Global uncertainty is in the driver's seat," said Priyanka Kishore, forex strategist at Standard Chartered Bank. "There is a tangible risk of the rupee moving towards 55 rupee to the dollar levels," she said. Yes Bank chief economist Shubhada Rao said the Indian currency was in "uncharted territory."

The falling rupee is bad news for India's economy, pushing up import prices. It will also further strain the government's budget because oil imports - which are priced in dollars-will become more expensive.