The International Monetary Fund (IMF) on Thursday projected an 8.8% growth for the Indian economy in 2010-11, buoyed by strong farm sector growth and high domestic consumption demand.
However, persistent high food inflation remains a major worry, the fund said.
"The Indian economy is projected to grow by 8.8% in 2010-11...This year's growth is already benefiting from the rebound in agriculture and pick up in private consumption and employment prospects have improved and disposable income continues to rise," the IMF said in a report after Article IV consultations with the Indian officials.
Under Article IV, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies.
The IMF said the Reserve Bank of India is likely to take more monetary steps to contain inflationary expectations.
"We see room for further rate increase but at the same time it has to be done gradually," said Sanjaya Panth, senior resident representative, IMF.