In the backdrop of the RBI's tight monetary policy and high inflation, PMEAC Chairman C Rangarajan today said India's economic growth in the 2011-12 fiscal is likely to be about 8.5%, lower than the Budget projection.

"I believe (it would be closer to) 8.5%," he said at an Organisation for Economic Cooperation and Development (OECD) event.

In his Budget speech, Finance Minister Pranab Mukherjee had pegged economic growth for 2011-12 at 9%.

However, the Reserve Bank, in its monetary policy in May, said that GDP growth during 2011-12 would be only around 8%.

The Chairman of the Prime Minister's Economic Advisory Council (PMEAC), however, exuded confidence that India has the potential to clock GDP growth of 9% in the medium term.

"... Potential (for Indian economy) to grow at 9% exists," he added.

Mukherjee, too, said yesterday that the growth drivers of the country were intact, as the government aims at GDP growth of 9-9.5% during the XII Five-Year Plan, starting April, 2012.

The RBI has hiked key policy rates nine times since March, 2010, in a bid to tame inflation, which was over 9% in May. The central bank is scheduled to come out with a mid-term monetary policy review on June 16.

On the performance of the economy in 2011-12, he said there may be some slowdown in agricultural growth, but the expansion in the industrial and services sectors is likely to be higher year-on-year.

The 8.5% annual growth in 2010-11 was backed by robust numbers from the agriculture sector.

Agriculture and allied sectors grew by 6.6% during the fiscal, as against a meagre 0.4% in the previous year.

The growth of services, including banking and insurance, improved to 9.9% in 2010-11 from 9.2% in the previous fiscal, while manufacturing sector growth slowed down to 8.3%.