New Delhi (Agencies): On the back of a sharp recovery in farm output, but high inflation remains an area of concern, as the Indian economy is projected to grow by 8.6 per cent in 2010-11, the fastest in three years.

A growing economy would help the nation's annual per capita income to expand by 17.3 per cent to Rs 54,527 at current prices and by 6.7 per cent to Rs 36,003 at 2004-05 prices, according to the advance estimates of national income released today.

Per capita income is calculated by evenly dividing the national income among the country's population. Finance Minister Pranab Mukherjee and the Reserve Bank are however, concerned about high inflation, particularly
of food articles.

"All along I was maintaining, it should be around 8.5 per cent plus. 8.6 per cent is accepted," Finance Minister Pranab Mukherjee said adding, "Now the other issue is inflation, trade balance... these are to be addressed".

In December, general inflation was 8.43 per cent and food inflation for the week ended January 22 stood at 17.05 per cent.

Abundant rains in the last Monsoon season would help agriculture and allied activities to expand by 5.4 per cent in 2010-11 compared to just 0.4 per cent in the previous fiscal.

Weathering the global slowdown, the Indian economy managed to expand by eight per cent in 2009-10 and 6.8 per cent in 2008-09.

Expected to grow by a shade better than 8.5 per cent projected by both RBI and the Finance Ministry, the Gross Domestic Product (GDP) would expand to Rs 48.80 lakh crore (USD 1.07 trillion) in 2010-11 at the constant prices (with a base of 2004-05).

The 8.6 per cent GDP growth prospects, however could not cheer markets. The Sensex closed almost flat at 18037.19 on concerns of inflation and rising interest rates.

While services such as trade, hotel, transport and communications improved to 11 per cent from 9.7 per cent, the manufacturing remains static at 8.8 per cent year on year.

Mining and quarrying is likely to grow by 6.2 per cent, compared to 6.9 per cent a year ago, while electricity, gas and water production will grow up by 5.1 per cent, as against 6.4 per cent in the previous fiscal.

Chief Economic Adviser in the Finance Ministry Kaushik Basu said the "target of 9 per cent economic expansion for the next financial year is well with in the reach".