India economy to grow 8-8.5 pct in FY09 - official

By Rajkumar Ray

NEW DELHI (Reuters) - India's economy should grow 8.0-8.5 percent in the fiscal year starting in April, below an estimated 8.7 percent this year, a senior official said, as slowing factory output and rising inflation remain a concern.

Montek Singh Ahluwalia, the deputy chairman of the Planning Commission, said the government would ensure that investment activities are not hindered.

"I stand by my (economic growth) prediction for fiscal year 2008/09 which is 8-8.5 percent," Ahluwalia told reporters on Wednesday after a business conference.

In January, the prime minister's economic panel forecast gross domestic output to expand by 8.5 percent in the year to March 2009.

Finance Minister Palaniappan Chidambaram said in Singapore on Wednesday he expected the economy to grow close to 9 percent in 2007/08. The Reserve Bank of India's forecast is 8.5 percent and the government's statistical office has projected 8.7 percent.

Ahluwalia said a recent slowdown in industrial output in Asia's third-largest economy was a concern. "We have to ensure that investment decisions are not altered," he said.

Industrial growth fell to 5.3 percent in January from double-digit levels seen early in 2007 as the impact of tight monetary policy and a strong rupee crimped demand.

The central bank has kept its main lending rate unchanged for a year at its highest in more than five years at 7.75 percent and it is worried about annual inflation that has climbed to nearly 6 percent, its highest in 10 months.