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India advisory panel - keeping fiscal deficit target a 'challenge'

A customer shops at a grocery store in the northern Indian city Lucknow July 6, 2009. REUTERS/Pawan Kumar

NEW DELHI (Reuters) - India may it find it a "challenge" to stick to its fiscal deficit target of 4.8 percent of GDP in the fiscal year that ends next March, the prime minister's economic advisory panel said in a report on Friday.

The country's bloated fiscal deficit has been a key concern for Asia's third-largest economy -- currently undergoing its worst slowdown in a decade -- and has triggered the threat of a sovereign credit rating downgrade by global ratings agencies.

The panel also said that the Reserve Bank of India (RBI) must maintain its current monetary stance until the rupee stabilises. India's currency dropped to record lows against the US dollar in August.

The panel said that net foreign direct investment (FDI) flows would likely be at $21.7 billion (13.7 billion pounds) for the current fiscal year, down from an earlier estimate of $24 billion.

(Reporting by Manoj Kumar and Rajesh Kumar Singh)