As the government takes measures to rein in inflation ahead of the Lok Sabha polls slated for early next year and RBI tightens monetary policy, the Asian Development Bank today projected the country's economic growth to moderate 8 per cent this fiscal from 8.7 per cent in 2007-08.

However, the Indian economy will rebound to 8.5 per cent growth rate during 2009-10 on the back of a pick-up in consumer spending and more accommodative monetary policy, the Manila-based ADB said in its Asian Development Outlook, 2008.

Along with GDP growth rate, ADB expected inflation to slightly moderate to 4.4 per cent this fiscal as the government and RBI take measures to curb it against 4.5 per cent in 2007-08.

But inflation will again rise to 5 per cent in 2009-10 as growth rebounds and monetary policy softens, said Narhari Rao, principal economist with ADB's India Resident Mission, describing the recent rise in prices as the "biggest worry" for India at the moment.

As per the Central Statistical Organisation's advance estimates, Indian economy is anyway likely to show a moderate economic growth rate of 8.7 per cent in 2007-08 against 9.6 per cent in the previous year and 9.4 per cent in 2005-06.

"Following the slowdown that began in 2007-08, economic growth will likely moderate further to 8 per cent in 2008-09. Overall GDP growth in 2009-10 is predicted to return to around 8.5 per cent, nudged along by a broad-based pick-up in spending," the outlook said.

ADB's projection is lower than the Prime Minister's Economic Advisory Council's expectation of 8.5 per cent for the next fiscal. It is also lower than nine per cent growth projected by the UN-ESCAP recently, but higher than 7.8 per cent expected by the UK-based magazine Economist.

Even though growth has faltered the economy has built up considerable momentum in recent years and this sense of dynamism should help pull up the pace again, the ADB said.

"Despite growth moderating, we still feel that Asia, including India, does have favourable policy conditions. We feel that productivity growth linked to economic modernisation and structural transformation will continue, which basically means that these economies will continue to invest and continue to grow," Narhari Rao said.

However, the growth outcomes in the economy over the next two years will depend partly on the timing and scope for relaxing the present tight monetary policy, the ADB said.

"Exactly, when this will be feasible will be determined by success in containing inflation," the Outlook said.

Curbing inflation depends on two uncontrollable factors: the out turn in domestic food production and the course of international commodity prices, it said.

(PTI)