India's economy is likely to grow less than 7.6 percent this fiscal year and the RBI's aim to bring inflation down to 7 percent by the end of March faces uncertainty over the rupee, oil prices, and the eurozone debt crisis, Reserve Bank of India Governor Duvvuri Subbarao said on Thursday.

He said the RBI will revise its growth forecast in January.

RBI

RBI Governor Duvvuri Subbarao

Analysts have been ratcheting down their growth outlooks for India, with some expecting the economy to struggle to grow 7 percent in the fiscal year ending March, below last year's 8.5 percent.

The RBI left interest rates on hold last week after 13 increases since March 2010 and shifted its focus towards growth as the once-surging economy is battered on several fronts, even though headline inflation remained above 9 percent in November.

Subbarao's efforts to fight inflation have been made more difficult be a worsening fiscal deficit and, more recently, a tumble in the rupee, which last week was down nearly 20 percent from a peak in July to a record low before recovering somewhat after moves by the RBI to prop it up.

India's economy grew 6.9 percent in the September quarter, the slowest in over two years. Data last week showed the October index of industrial output fell 5.1 percent, far worse than expected, with annual capital goods output plunging 25.5 percent, a sign of dismal corporate sentiment.

Policy gridlock in New Delhi following a spate of corruption scandals has battered investor sentiment and stalled approvals of major projects needed to ease capacity bottlenecks that curb economic growth and add to inflation.

Early this year, the government had set a target of 9 percent growth this fiscal year for Asia's third-largest economy.