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Indian growth to be lower than 8pct - Mr Rangarajan

Mr C Rangarajan, the chairman of the prime minister's economic advisory council, as saying that India's economy will grow a lower than expected 8% during this fiscal year.

Mr C Rangarajan also said that the economy needs to use both fiscal and monetary methods to tame inflation to maintain high growth. The council provides economic forecasts twice every year and had earlier predicted a growth of 8.2% for the current year that ends March 2012.

Mr Rangarajan said that "When inflation is remaining at the level which is way above the comfort level of central bank, therefore in that situation it becomes absolutely essential for the central bank to act."

Businesses have seen a steady rise in their cost of funding following 12 rate increases by the central bank since March 2010, and are bracing for another likely increase at the bank's next policy review on October 25th 2011.

In a further sign that the rate increases by the Reserve Bank of India have failed to rein in inflation, the latest weekly data showed the food price index was up 10.60% through October 8th 2011 versus a year ago as compared with a 9.32% reading in the prior week.

Mr Rangarajan's comments echo comments by finance minister Mr Pranab Mukherjee that most observers expect India's economy to grow less than 8% in the current fiscal.

India's industrial output growth has dwindled to low single digits, while car sales are expected to rise just 2% to 4% this fiscal, an industry body had forecast. That's remarkably down from a 30% sales growth last year.

Mr Rangarajan said that "Slow growth in industrial production should not be entirely put at the door of rising interest rates. Primary responsibility of the country's central bank is to tame inflation."

Headline inflation readings have been above 9% for 10 straight months, driven up by bottlenecks affecting food distribution, weakness in the rupee and high oil prices.