The Prime Minister’s economic panel has said the economy is growing at a rate that is above expectations and it is likely to expand by about 9 pc this fiscal, higher than the earlier estimate of 8.5 pc.

“It (GDP growth so far this fiscal) is certainly above the original expectation of 8.5 per cent, may be close to 9 per cent,” Prime Minister Economic Advisory Council (PMEAC) Chairman C Rangarajan said.

Earlier, Finance Minister Pranab Mukherjee as well as PMEAC had projected 8.5 percent growth for 2010-11.

However, the economy has shown recovery since the impact of global financial crisis that hit in 2008 and India’s GDP has grown at 8.9 percent in the first half of the current fiscal.

Hence, the government has now projected growth rate that is higher than 8.5 percent.

Mukherjee has said that he expects the economy to grow by 8.75 percent, while Chief Economic Advisor Kaushik Basu has projected growth rate of 9.1 percent, subject to improvement in European debt crisis situation.

On whether high industrial production and GDP growth rate would prompt the RBI to tighten monetary policy further to tame inflation, Rangarajan said, “I think the RBI’s decision will depend upon how the inflation behaves. That’s the key factor.”

Industrial production has expanded 10.3 percent during April-October this year.

For October, the Index of Industrial Production (IIP) showed a growth of 10.8 percent.

The Reserve Bank is slated to announce quarterly monetary policy on 16th December, while the inflation data for November would be released on 14th December. For the month of October, Inflation was 8.58 percent.

Rangarajan said inflation is still well above the comfort zone, adding, “If there is still tendency for inflation to fall in the next few weeks that would be the guiding factor as far as RBI is concerned.”

To tame inflation, RBI had last month increased its short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each to 6.25 percent and 5.25 percent.

It was the sixth time this fiscal that the apex bank had raised key lending and borrowing rates to cool inflationary pressures in the economy.