New Delhi, July 23: The Prime Minister's Economic Advisory Council (PMEAC) on Friday revised the growth forecast for the current fiscal to 8.5 percent from 8.2 percent earlier.
Addressing a press conference here, the chairman of the advisory council Dr. C Rangarajan, said inflation would be 6.5 percent by the end of fiscal 2010.
This, he said, is mainly due to the prospect of a good monsoon.
He advocated release of available food stocks to dampen effects on prices.
He said containing inflation and improving farm productivity are some of the major challenges for the economy to grow at nine percent.
He also said that the exit from an expansionary fiscal policy is not only feasible, but necessary.
"This is mainly possible due to high buoyancy in direct and indirect taxes, besides the decisions like decontrolling the petroleum prices and telecom auctions," he added.
He further said the Reserve Bank of India (RBI) needs to have a bias toward tightening.
"Liquidity conditions are taut enough for monetary policy signals to be appropriately transmitted to the financial sector," he added.
The RBI is expected to raise interest rates at least by 25 basis points.