Economy seen growing at 7.2% in FY-10: Government

NEW DELHI: Government on Monday forecast its economic growth for this fiscal at 7.2 percent, as against 6.7 percent achieved in the previous India fiscal, despite a 0.2 percent declined predicted in farm output.

This reinforces the possibility that the government may start to unwind its fiscal stimulus in the forthcoming budget. The official growth forecast is line with other estimates this month that the pace of growth will quicken, and comes amid some indications that Reserve Bank of India could raise interest rates even before its next policy review in April to dampen inflation.

"These numbers means that the government will have to consider exiting from the fiscal stimulus in the budget," said Rajiv Kumar, CEO of ICRIER, a Delhi-based think-tank.

"Even if they don't do that fully, I expect them to at least announce a roadmap for exit ... The RBI will probably watch the government action on the stimulus exit in the budget before taking a call on interest rates."

The advance estimates of the country's gross domestic product released by the Central Statistical Organisation (CSO) forecasts a growth of 9.9 percent in services and 8.9 percent in manufacturing -- the highest among the eight broader economic activities.

Mining and quarrying comes next with an 8.7 percent expansion followed by 8.3 percent for trade, hotels, transport and communications, and 8.2 percent each for energy and water, and social and community services.