Indian economy grows 8 pc in Q-2

New Delhi: The economy grew eight per cent in the July-September quarter compared with the same period a year earlier, beating forecasts, data showed on Wednesday.

The announcement comes a day after Prime Minister Manmohan Singh, addressing the India Economic Forum, said that India would achieve a 10 per cent growth rate within the next three to four years.

On 27 November, Finance Minister P Chidambram had said that more Foreign Direct Investment (FDI) should be encouraged in India for a higher economic growth.

The expansion rate was marginally slower than the April-June rate of 8.1 per cent but higher than analysts' forecasts for 7.4 per cent annual growth in the Gross Domestic Product (GDP).

"This is much better than expectations. The strength is mainly on account of industry and services with manufacturing continuing to do quite well," Rajeev Malik, economist with JP Morgan, Singapore.

"Our forecast for the full year is likely to be revised up to 7.5 per cent from 7.2 per cent at present and next year's forecast is unchanged at 7 per cent."

Agriculture grew an annual 2.0 per cent in the July-September quarter, the second of the financial year, compared with 2.0 per cent growth in the previous three-month period.

Financial, insurance and business services grew 9.9 per cent compared with 8.3 per cent in the previous three-month period.

Manufacturing output, which accounts for about a quarter of GDP, expanded 9.2 per cent, slower than 11.3 per cent in April-June.

Finance Minister Palaniappan Chidambaram warned earlier this month that July-September industrial output would be lower than in April-June as a result of heavy flooding, which disrupted industrial activity in some western states.

The central bank has forecast that Asia's third-largest economy will grow 7.0-7.5 per cent for the financial year ending on March 31, 2006, compared with 6.9 per cent growth in 2004/05.

The economic growth figures on Wednesday are provisional. India does not release seasonally adjusted data to show the change between quarters.