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India's current fiscal GDP growth seen at 8.6 per cent

NEW DELHI — India's economy is expected to grow 8.6 per cent in the financial year ending in March, at the lower end of central bank's forecast, a Reuters poll of analysts shows.

The government will issue its first official growth estimate for 2006/07 on Wednesday, one week after it revised growth for 2005/06 up to 9.0 per cent from 8.4 per cent.

"Growth is very strong. On top of 9 per cent, we are getting another year of more than 8 per cent growth showing demand is

still strong. I expect the trend to continue," said Riyaz Khan, economist with think-tank Centre for Monitoring Indian Economy.

Growth in Asia's fourth-largest economy has averaged 8.3 per cent over the past three fiscal years.

Last week, the Reserve Bank of India said it expected growth of 8.5 to 9 per cent in 2006/07, while Finance Minister Palaniappan Chidambaram has said growth could be close to 9 per cent.

India's economic momentum has strained infrastructure and led to a squeeze on capacity that has added to inflation pressures.

The central bank raised its key lending rate last week to 7.50 per cent, a four-year high, following four rate rises in 2006.

Most analysts expect manufacturing to grow more than 9 per cent in 2006/07, while services are seen growing close to 10 per cent.

Farming, which accounts for a fifth of GDP but employs about 60 per cent of the population, remains the laggard and is expected to grow around 3 per cent.

Prime Minister Manmohan Singh has said farm output must grow close to 4 per cent on a sustained basis to ensure GDP increases by 7-8 per cent annually over the next few years.

Singh's government has pledged massive investment in farm infrastructure to improve irrigation and lessen the impact of poor monsoon rains on agriculture.

The annual GDP forecast is due tomorrow after 0630GMT.