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'India's economy to grow about 8 pc'

business Updated: May 06, 2008 21:03 IST

Reuters
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India's economy is expected to grow around 8 per cent in the current fiscal year, and annual inflation, now at its highest in more than three years, may moderate in a few weeks, a top official said on Tuesday.

The Reserve Bank of India (RBI) and most other forecasts have pegged growth in Asia's third-largest economy at 8.0-8.5 per cent in the 2008/09 financial year as the global economic slowdown and monetary tightening takes its toll.

The Indian economy is estimated to have grown at 8.7 per cent in 2007/08, slower than the previous year as higher interest rates hurt consumer demand.

"My projection was 8.0-8.5 per cent," Montek Singh Ahluwalia, deputy chairman of India's Planning Commission, which charts the country's five-year economic plans, told reporters.

"I will be happy at the lower end. A growth of around 8.0 per cent is quite acceptable."

While still strong the economy has lost altitude from scorching 9.6 per cent expansion in 2006/07, which was the highest in 18 years.

Finance Minister Palaniappan Chidambaram expects the economy to grow more than 8.0 per cent in the current fiscal year. The government wants growth of 9 per cent or above to reduce widespread poverty and create jobs.

The finance minister says 9-plus per cent growth -- with 4 percent inflation -- is the ideal rate although a ministry report has said just sustaining 9 per cent growth would be a challenge due to inflation pressures and infrastructure constraints.

Ahluwalia said he expects the inflation rate to moderate.

"I do hope that in the next few weeks inflation will moderate. The government can take more measures if prices are contained," he said.

The government and the RBI have taken fiscal and monetary steps to calm price pressures ahead of key state elections later this year and federal polls next year.