The Reserve Bank of India (RBI) has said it may ease its monetary policy amid fears of a global economic slowdown.
Duvvuri Subbarao, the governor of RBI, told the BBC the bank is likely to shift its focus towards boosting growth.
The RBI has raised its key interest rate 13 times since March 2010 in a bid to control rising consumer prices.
However, there have been fears that excessive tightening may hurt growth.
"From here on we could expect reversal of monetary tightening," Mr Subbarao told the BBC's India Business Report.
However, Mr Subbarao added that it was "difficult to say when that will take place and in what shape it will roll out".
'Mindful of growth'
Over the past two years, the RBI has focused on controlling the high rate of inflation in the country.
Rising costs of food and other essential commodities such as fuel saw consumer prices rise sharply in India, prompting the central bank to raise the cost of borrowing in a bid to slow domestic demand.
The tightening measures have started to have some impact on stemming price growth, with the rate of inflation falling to 9.1% in November, from 9.7% in the previous month.
However, there have been concerns that the high cost of borrowing has also hurt businesses in the country.
Industrial production in India fell 5.1% in October from a year earlier, the first such fall in almost two years.
That, coupled with a slowdown in the eurozone and the US, has raised fears that India's economic growth may slow further in the coming months.
Mr Subbarao said that although inflation still remained a risk, the RBI was aware that it needed to boost growth amid an uncertain global economic environment.
"We have always been mindful of growth concerns, contrary to popular perceptions," he said.
"In fact, in our December statement we said that growth is a serious concern. So I think the balance between growth and inflation will shift in 2012," he added.