Prime Minister Economic Advisory Council on Friday scaled down its projection for economic growth this fiscal from 8.5 per cent to 8 per cent owing to domestic and international factors like rise in crude oil and commodity prices.

The council had projected a growth rate of 8.5 per cent in January, since then oil and commodity prices have risen substantially in the global market.

"Given the domestic and international factors, it may be reasonable to expect the growth rate to remain around 8 per cent in 2008-09," council's chairman C Rangarajan said here.

The Indian economy grew 9 per cent last fiscal. Enthused by this, Finance Minister P Chidambaram expressed confidence the economy will grow by close to 8.5 per cent this year.

Rangarajan expected inflation to cool from around eight per cent to six per cent in next 3-4 months, pinning hopes on good procurement of wheat and projection of good monsoon. "If the rains are good, then we can hope to see inflation rate come down further and remain at around 5.5 per cent."

Attributing the present rise in inflation, which is at a 45-month high of 8.24 per cent, to domestic and international factors, he said the prices, more particularly food prices, have been rising "mainly because of supply side factors".

Drought in Australia, he said, had reduced the availability of wheat considerably and diversion of corn for bio-fuel has cut its supply for consumption. Besides the food prices, oil prices have also risen sharply, he said.

Domestically, for the past three ears, money supply has been growing at an annual rate exceeding 20 per cent, he said. "This has injected significant liquidity into the system."