Indian economy will grow 7.5 percent but with high inflation: RBI

Mumbai, Jan 29 (IANS) The Reserve Bank of India (RBI) Friday projected an impressive 7.5 percent growth for the Indian economy in the current fiscal even as it hiked the outlook for annual inflation rate to 8.5 percent by end-March.

The central bank had earlier pegged the growth rate at 6 percent and inflation at 6.5 percent.

"Assuming a near-zero growth in agricultural production and continued recovery in industrial production and services sector, the baseline projection for gross domestic product growth for 2009-10 is now raised to 7.5 percent," the central bank said.

"Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the baseline projection for wholesale price inflation for end-March 2010 is now raised to 8.5 percent."

RBI Governor D. Subbarao, while presenting the third quarterly update of the monetary policy before chief executives of commercial banks, said he also expected the country's growth rate of 7.5 percent to be sustained in the next fiscal.

"As with growth, we shall formally announce our inflation projection for 2010-11 in our monetary policy in April. But on the assumption of normal monsoon and global oil prices remaining around the current level, it is expected inflation will moderate from July."