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Last Updated: Tuesday, 7 February 2006, 09:48 GMT
India's economy accelerates again
Indian traffic
Rising consumer demand is boosting industrial output
India's economy is set to grow by a faster-than-expected 8.1% in the year to the end of March, according to a government estimate.

It represents the fastest growth in two years, and beats forecasts from Indian economists and the central bank.

Growth is being helped by a boom in the manufacturing and services sectors, set to rise by more than 9%.

A key driver is set to be farm output, which is forecast to grow at 2.3% thanks to decent monsoon rains.

Business reforms

Sixty percent of India's one billion people live in rural areas and a healthy farming industry creates higher demand for goods and services.

"Clearly the resurgence in the services and manufacturing sectors has pushed economic growth to a higher trajectory," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

He said the government would have to announce further business-friendly policies in its next budget if it wanted to sustain current levels of growth.

India's Congress Party-led coalition government has pledged to introduce business reforms that will help keep the economy growing at 7-8% a year.

Prime Minister Manmohan Singh thinks that economic growth could reach as high as 10% in the next few years.

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