News: India's GDP grows annual 9.3 pct in Jan-March

(RTR 31/05/2006) New Delhi - India's economy in the January-March quarter grew a faster-than-expected 9.3 percent from a year earlier, data showed on Wednesday, raising expectations for further interest rate rises.

The expansion rate in the fourth quarter of India's financial year, which runs from April to March, was higher than the revised October-December rate of 7.5 percent and above analysts' forecast for 7.8 percent annual growth in gross domestic product.

Analysts said the faster pace of growth, led by strong farm, manufacturing and services output, boosted the argument for higher interest rates in July when the central bank reviews monetary policy.

"It's a big positive surprise on the growth front. The strong report comes on the back of higher-than-expected farm sector and manufacturing growth," said Shuchita Mehta, economist at Standard Chartered Bank in Mumbai.

"It strengthens the case for a rate hike in July and is negative for bonds."

Agriculture -- which accounts for about 23 percent of GDP -- grew an annual 5.5 percent in the January-March quarter, compared with a downwardly revised 2.9 percent annual growth in the previous three-month period.

Manufacturing output, which accounts for nearly 15 percent of GDP, expanded 8.9 percent, faster than a revised annual growth rate of 8.3 percent in October-December.

Full-year GDP growth for 2005/06 was revised to 8.4 percent from a previous estimate of 8.1 percent.

The benchmark 10-year bond yield inched up to 7.6611 percent from 7.6552 percent after the data and the rupee gained to 46.35/37 per the dollar from 46.44/45 beforehand.

India's main stock index was down 4.8 percent, trimming losses of as much as 5.5 percent earlier in the day.

Indian policy makers forecast expansion in 2006/07 of 7.5-8.0 percent. Prime Minister Manmohan Singh has said growth should reach 10 percent in two to three years, although analysts say India's poor infrastructure could hinder long-term progress.

The figures are provisional. India does not release seasonally adjusted data to show change between quarters.