Prime Minister’s Economic Advisory Council said that amid a difficult global economic scenario, India’s GDP growth will slow down to 8.2% in the current fiscal and the inflation rate is expected to remain high at 9% till October.

In its report on the state of economy, the PMEAC said that “The projected growth rate of 8.2%, though lower than the previous year, must be treated as high and respectable given the current world situation.”

It further said that the global economic and financial situation was unlikely to improve (in the foreseeable future) and this could impact the domestic economy.

The Indian economy grew 8.5% in the last fiscal ended March 31st 2011.

The PMEAC’s projection for 2011-12 is higher than the 8 per cent growth forecast made by the Reserve Bank of India in its annual monetary policy, but it is lower than the government’s target of 8.5%.

On inflation, the PMEAC said that it was likely to come down to 6.5% by March 2012, but would remain high at 9% till October.

It said that “There will be some relief starting from November and (inflation) will decline to 6.5% by March 2012.”

Hinting at further interest rate hikes, the PMEAC also said the RBI would have to continue with its monetary tightening policy measures to contain inflation.

The central bank has already hiked benchmark rates 11 times since March 2010, as part of efforts to tame inflation.

Headline inflation has been above 9% since December 2010.

The PMEAC report also said that capital flows this fiscal were likely to rise to USD 72 billion from USD 61.9 billion in 2010-11.

The FDI inflows were projected at USD 35 billion, up from USD 23.4 billion in 2010-11. However, the FIIs were likely to infuse just USD 14 billion, less than half of the USD 30.3 billion they pumped into the country in the previous fiscal.

(Sourced from Moneycontrol.com)