New Delhi, Oct 18 (IANS): Despite recent moderation, the government is hopeful that the Indian economy would grow at 9-10 percent in the medium-term as the fundamentals remain strong.

"The fundamentals of the economy are strong and medium-term growth potential is close to 9-10 percent," according to a background note of the finance ministry circulated to economic editors here Tuesday.

India's economic growth slowed to 7.7 percent in the first quarter of 2011-12, the weakest growth in six quarters, due to a sharp drop in industrial production.

"While there may be some moderation in growth in the current fiscal, the fundamentals of the economy are still intact and the growth story of the Indian economy is robust," the official note circulated on the eve of the annual Economic Editors' conference said.

The government is likely to target 9 percent growth for the 12th Five Year Plan that begins April 1, 2012.

Finance Minister Pranab Mukherjee will address the inaugural session of the two-day event Wednesday. About 300 editors and financial writers, including about 70 from vernacular press are likely to participate at the conference.

On inflation, the official note said it remained one of the biggest challenges to the government.

"Maintaining the growth momentum in the economy with price stability is one of the biggest challenges that India is facing in recent times," it said.

Inflation has remained almost near double-digit for nearly two years.

The Reserve Bank of India has hiked key policy rates 12 times in the last 18 months to curb inflation. Despite the aggressive monetary tightening inflation has remained stubbornly high.

The finance ministry note said headline inflation was likely to moderate after December.

"Prices of primary articles will start to decelerate from December 2011 due to an expectation of sharp decline in some food articles, fruits and vegetables and major non-food articles."

However, the prices of eggs, meat and fish, milk and pulses were likely to remain stable.