Prime Minister Manmohan Singh on Wednesday said the economy will grow by at least 8.5% this fiscal and inflation will drop to 7% by year-end.
The prime minister said with India becoming an increasingly integrated and open economy, international developments have a bearing on matters like inflation and all possible steps were being taken to mitigate their impact.
"Our economy is in good shape. We will have a growth rate of 8.5% in this fiscal year," Manmohan Singh said at an interaction with editors of news channels.
"If we were concerned about only curbing inflation, we could have done it, I think, by pursuing tighter monetary policies...we could have brought about a situation where price rise could be moderated," he said.
"But in the process if growth gets hurt I think that would not do our country any good," he added.
"We have to deal with inflation despite an adverse international environment. I give you my assurance that we will succeed and inflation rate should come down to no more than seven%."
Reserve Bank of India (RBI) had last month hiked key interest rates to combat high inflation and hinted at further tightening in the future.
India's annual food inflation dropped by nearly four%age points to 13.07% for the week ended Jan 29, having been in the high double digits in previous months. Annual inflation based on wholesale prices eased marginally to 8.23% in January as against 8.43% in the previous month.
"We are trying to deal with inflation at a time when we do not have all the instruments at our command in the sense that we do not have control over international events," the prime minister said.
"We are an increasingly open economy and the oil prices are rising, food prices are rising, commodity prices are rising," he added.
The oil marketing companies had hiked prices of petrol for a fifth time in 2010 in December by Rs 2.95 per litre. The hike was necessitated by the rise in global crude prices to $90 per barrel.