The International Monetary Fund (IMF) expects the Indian economy to grow by 8.8 per cent during the current financial year, up from 7.4 per cent a year ago, mainly driven by robust growth in farm sector and pick-up in consumption.

The multilateral lending agency, however, expressed concern over rising prices and underlined the need for controlling inflationary expectations by more monetary actions by the Reserve Bank.

“Indian economy is projected to grow by 8.8 per cent in 2010-11...This year’s growth is already benefiting from the rebound in agriculture and pick-up in private consumption and employment prospects have improved and disposable income continues to rise,” the IMF said in a report after Article IV consultations with the Indian officials.

The economy expanded by 8.9 per cent during the first half of the current fiscal and, according to the Government estimates, may revert to the pre-global crisis level of 9 per cent growth.

However, the IMF has projected moderation in growth form the current high levels to 8.1 per cent next fiscal. Listing rising prices as a major area of concern, the IMF said the RBI could take more monetary steps to contain inflationary expectations.

“We see room for further rate increase (by RBI) but at the same time it has to be done gradually and needs to be looked at continuously,” the senior Resident Representative of the IMF, Mr Sanjaya Panth, told reporters in Delhi.

The food inflation, according to the data released by the Government, rose to a yearly high of 18.32 per cent for the week ended December 25. The overall inflation was 7.48 per cent in November. The inflation, according to IMF, could moderate to 6.5 per cent by March-end.

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