The Indian economy is estimated to grow 6.9 percent this fiscal year, its slowest pace in three years, the government said, as tight monetary policy and a logjam in government policy making coupled with weak global conditions stifles investment.

Growth estimates for Asia's third-largest economy in the current fiscal year to end-March have been cut from an earlier estimate of about 9 percent.

Economists say the Reserve Bank of India's (RBI) aggressive policy tightening since March 2010 has steadily reduced investment activity and is now threatening to squeeze growth to levels last seen during the financial crisis in 2008-2009.

From an original forecast of 9 percent growth to now 6.9 percent is a significant climb down. We expect that going forward growth momentum will remain subdued, said Sujan Hajra, chief economist at Anand Rathi Securities.

From the monetary policy point of view, signals are very clear that policy will remain accommodative.