08/01/2011 07:32 EDT | Updated 10/01/2011 05:12 EDT

India economy panel cuts economic growth forecast to 8.2 per cent, inflation to stay high

NEW DELHI - A top economic panel Monday scaled down its forecast for India's economic growth to 8.2 per cent from 8.5 per cent after a series of interest rate hikes by the central bank to tame stubbornly high inflation.

The Prime Minister's Economic Advisory Council said that inflation would remain at a high 9 per cent until October, when it would begin to ease.

The Council projected a bleak outlook for the global economic and financial situation and warned that this could hurt India — Asia's third-biggest economy.

The lower growth forecast for the fiscal year through March 2012 follows a series of interest rate hikes to tame inflation.

The Indian economy grew by 8.5 per cent in the last fiscal year that ended March 31.

"The projected growth rate of 8.2 per cent, though lower than the previous year, must be treated as high and respectable, given the current world situation," Council chairman C. Rangarajan told reporters after he presented the report to Prime Minister Manmohan Singh.

The slowdown was also blamed on poor industrial performance which the Council said would grow by 7.1 per cent this year compared to 7.9 per cent the previous fiscal year.

However, the services sector was projected to grow at 10 per cent, compared to 9.4 per cent last year.

The services sector accounts for more than 50 per cent of India's gross domestic product.

Rangarajan said headline inflation rate would remain at 9 per cent between July and October, but would decline gradually.