New York (PTI): India's economy may grow at the slowest pace in four years in the next 12 months as a global slowdown reduces foreign investment and exports, country's Finance Minister P Chidambaram was on Thursday quoted as saying.

"We think there will be some second-order effects from the US slowdown," Chidambaram told Bloomberg News in Singapore today, giving an estimate for the next year's growth for the first time. "We are quantifying it at between 50 and 75 basis points. We should still expect to grow in 2008-09 at 8 per cent or a little bit more than 8 percent."

India's economy has expanded at an average 8.7 percent since 2003, the fastest pace since independence in 1947, helping increase the ratio of tax to gross domestic product to 12.5 percent in the year ending March 31 from 9.2 percent in 2003, Chidambaram said.

"The Reserve Bank of India will have to balance the growth objective and the inflation objective," Chidambaram said. "If you want more growth, then interest rates must come down. It's the Reserve Bank's call."

India's inflation had accelerated to 11-month high of 5.92 per cent in the first week ended March 8. The Reserve Bank of Indian aims to limit inflation rate at close to five per cent for the current fiscal.

"Inflation is driven by high commodity prices, food prices and since we are importing commodities, we are actually importing inflation," it quoted Chidambaram as saying in a story posted on website.

Crude and edible oils are among India's biggest imports and their costs have risen more than three times since the current government came to power in 2004, Chidambaram said, adding that the prices of maize, rice and wheat, staple items of food in India, have either doubled or tripled between 2004 and 2008..

To contain prices, he told Bloomberg News, the government last month cut import taxes on edible oil for the fifth time in 15 months and stopped exports of wheat, sugar, rice and edible oils.

"At the moment, we are assuming that commodity prices will remain high because of demand. We have therefore taken fiscal steps to reduce the costs of commodities," Chidambaram said.

"We have to remain vigilant and flexible and take such steps depending upon how the prices play out. We stand ready to take similar steps but if prices cool down, then we won't need to take those steps."

Bloomberg quoted D H Pai Panandiker, President of RPG Foundation, an economic policy group in New Delhi, as saying that accelerated growth is vital for India to raise the resources needed for its various programmes. "News of this kind will further depress the stock market."'

Citigroup Inc., it said, this week cut India's growth forecast to 7.7 percent in 2008 from an earlier estimate of 8.3 percent due to the impact of a likely recession in US.