Finance minister Pranab Mukherjee on Tuesday said the economy will grow by around 8.5 per cent in the current fiscal despite the conscious decision of the Reserve Bank to sacrifice growth to contain inflation.

"I am still holding the projection which I had that is 8.5 per cent plus... We shall have to wait for some time. But it would not be less than 8 per cent plus," he said in an interview to PTI.

The finance minister was here to participate at the 'US-India Economic and Financial Partnership' jointly organised by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think-tank.

The government and the Reserve Bank, Mukherjee said, have been trying to strike a balance between containing growth and promoting inflation.

"One need not cancel the other, but controlling inflation is essential. In a developing economy like ours, if we cannot bring inflation within a manageable limit, the hardship goes to the weaker sections of the people... they are the worst sufferers," the minister said.

Sacrificing growth, the RBI has raised key policy rates ten times since March, 2010, to contain inflation, which is hovering at around 9 per cent. Inflation stood at 9.06 per cent in May.

Controlled inflation is needed, Mukherjee said, adding that the "best course would be to reduce inflation to have it at the acceptable moderate level and also to have reasonable high growth rate... because if you want to have high growth which is not realistic, that would lead to inflationary pressure."

On the other hand, he said the country cannot afford to have very low growth as it would mean less jobs and no wealth creation. "So we shall have to strike a balance and exactly we are doing that," the minister said.

The Reserve Bank, which is slated to hold its next review of the monetary policy on July 26, has pegged India's GDP growth in 2011-12 at 8 per cent, lower than the 8.5 per cent rate recorded in the previous fiscal.

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No rollback in fuel, LPG prices: FM

Govt had reduced excise and customs duties on crude oil with an annual revenue loss Rs 49,000 cr

Ruling out any rollback of the recent hike in prices of petroleum goods, finance minister Pranab Mukherjee on Wednesday said the decision to cut duties would not impact the fiscal deficit of the Indian government.

"No. No question of revoking," he told PTI when asked whether there was any possibility of a part withdrawal of the hike in prices of diesel, cooking gas and kerosene announced by the government recently.

The finance minister was here to participate at the 'US-India Economic and Financial Partnership' jointly organised by the Confederation of Indian Industry (CII) and Brookings Institute, a Washington-based think-tank.

In view of the spiralling prices of crude oil in the international market, the Indian government had increased the price of diesel by Rs 3 per litre, cooking gas (LPG) by Rs 50 per cylinder and kerosene by Rs 2 per litre.

The government had also reduced excise and customs duties on crude oil and other goods, sacrificing annual revenue of Rs 49,000 crore.

The hike in prices of petroleum goods led to protests in several parts of the country and many state governments announced the withdrawal of value added tax (VAT) on petroleum products to lessen the impact of the hike on the common man.

Referring to the impact of the duty reduction on the fiscal deficit of the central government, Mukherjee said the shortfall would be made good by buoyancy in tax collection and improved compliance.

"I do not think so because this was the conscious decision... about Rs 49,000 crore will be the shortfall in the duty. I think it would be possible for us to make it up through buoyancy and by better compliance," he said when asked about the impact of the duty cut on government finances.

The government proposes to bring the fiscal deficit down to 4.6 per cent of the GDP in the current fiscal from 4.7 per cent in 2010-11. It was as high as 6.3 per cent in 2009-10.

Mukherjee has already written to state chief ministers to look at the possibility of reducing the sales tax on petroleum products to reduce the impact of the price hike on the common man.