Economy seen growing at 7.2% in FY10: Government

India's economy is expected to rise to 7.2% in 2009-10, the government said on Monday, reinforcing the possibility it 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 the Reserve Bank of India (RBI) 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."                                           

Manufacturing, one of the main drivers behind the GDP growth, is seen growing at 8.9% in 2009-10, the Central Statistical Organisation forecast said.                                           

Farm output is forecast as falling 0.2% after the worst monsoon in 37 years hit production, but the figure is better than initial estimates and could help ease pressure off high food prices.                                           

The economy grew 6.7% in the last fiscal year amid the global economic crisis.                                           

Last month, the RBI revised its GDP estimate to 7.5% from 6.5% for the current financial year ending March, and lifted its wholesale price index inflation forecast for the fiscal year to 8.5%.                                           

Indian policymakers, including the prime minister Manmohan Singh, have said they expect the economy to grow around 7.5% in the fiscal year ending March.