The economy is expected to grow between 8 per cent and 8.5 per cent next year amidst concern of inflation, the Chairman of Economic Advisory Council to the Prime Minister, C Rangrajan, said in Ahmedabad on Saturday.
"In last three to four weeks some decline in food prices has been seen and with all indications that rabi output will be as good as last year's, I think it should act as dampener on food prices," he told reporters on the sidelines of the 45th IIM-A convocation.
The overall inflation, however, may continue to remain high in next two months, Rangarajan said.
Replying to a query on possible hike in key interest rates in the backdrop of inflationary pressures, Rangarajan said, "RBI has done it already and they will watch the developments in next two to three weeks."
If the prices continue to remain at a high level then probably they (RBI) will have to take further action, he said.
He said it will all depend on how the food prices behave.
To a query that whether it was an appropriate time to withdraw stimulus, Rangarajan said, "I think some part of the stimulus is withdrawn as the budget has already been presented and some excise duties have been raised which were removed last year."
Prime Minister Manmohan Singh earlier had said that the economy is likely to grow by 8.5 per cent next fiscal and 9 per cent a year later.
The Economic Survey said the economy would grow by up to 8.75 per cent next fiscal. Finance Minister Pranab Mukherjee had also agreed to it.