Mumbai: Industrial growth in the country would continue to improve even as the inflation rate drops to 10 per cent by December from its current level of over 12 per cent, C Rangarajan, Rajya Sabha member and former head of the prime minister's economic panel, said.

Addressing an FICCI seminar on financial inclusion, in New Delhi, on Monday, the former RBI governor said the revival of demand for capital goods and consumer durables is a sure sign of a recovery in industrial growth.

After a dismal performance in the previous two months, industrial growth in the country recovered to 7.1 per cent in July.

''Apparently there is some improvement in industrial production. I think this will continue,'' Rangarajan said.

He said inflation in the current year may look higher as the rate of inflation was moderate towards the end of December last year as the base (level of inflation in the previous year) effect will heighten inflation.

The inflation rate stood at 12.10 per cent for the week ended 30 August, despite moderation for the third week in a row.

Speaking on the same venue HSBC India country head Naina Lal Kidwai said even though there are signs of inflation cooling off with a fall in the prices of crude oil and food, inflation still needs to be monitored till the fiscal-end.

Nearly 60 per cent of average household spending in India is on food and it is very important that food prices abate, she said.

''Inflation is looking like it is going down but it is still not a sustained movement down,'' Kidwai added.