Since it will be so difficult...won't it discourage majority of people from mining...
Yes, it will discourage a lot of people and they will leave.
But that's no problem, the difficulty adjusts for that until a good balance is found.
...which will thus decrease the amount of new Bitcoins being mined compared to now?
There is a delay for difficult adjustments ,so there is still a difference (currently we are mining through the blocks 30% faster than on schedule, this also means the reward halving will happen sooner)
as I understand it, it is possible for the difficulty to go down, however I'm not clear on what the conditions are which will allow for it to go down.
After 2016 blocks the Bitcoin system checks how much faster/slower than the expected 2 weeks the blocks were solved and will set the new difficulty.