Mumbai: The Indian economy is expected to grow at 7.5 to 8.0 per cent in the fiscal year ending March 2009 even as the inflation rate may moderate to 8.0-9.0 per cent by end-March, C Rangarajan, chairman of the prime minister's economic advisory council, said.

Rangarajan, a former governor of the Reserve Bank of India, said the central bank was likely to continue with its tight money policy unless there was a significant decline in inflation.

''Unless there is some changes in price situation, monetary policy stance will continue," he said, adding, ''I am hopeful that inflation will moderate by the end of March 2009. It will decline to about 8 per cent.''

''There are certain factors, both domestic and external, which may slow down the growth rate, but we still think that the growth rate would be between 7.5 to 8 per cent,'' Rangarajan said.

He expects the economy to rebound with growth rate moving above 9 per cent in the next fiscal year ending March 2010. The country had posted 9.1 per cent GDP growth in 2007-08.

Rangarajan said the government was expected to meet its fiscal deficit target of 2.5 per cent of GDP in 2008-09 although the off-budget deficit might be higher than anticipated.

Rangarajan, however, noted that for inflation to go down prices of crude oil and food items would have to fall further.

The prime minister's advisory panel would release its economic outlook in a week's time.