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Last Updated: Monday, 27 February 2006, 12:38 GMT
Indian growth story to continue
Indian steel smelter in Bangalore
Industry is driving India's economic growth
A surging industrial sector, modest inflation and rising investment will help India's economy grow 8.1% in the year to March 2006, a report has said.

In its annual economic survey, India's Ministry of Finance said the current level of growth was "likely to continue for some years to come".

Despite surging oil prices over the last year, the country's main inflation measure would stay below 5%, it added.

But the report warned that a lack of infrastructure was holding back growth.

Risks ahead

"India's growth prospects are intricately intertwined with the rapid development of physical infrastructure such as power, roads, ports and airports," it said.

Bombay streetscene
India's economy has consistently grown at over 7% a year

It said industrial growth was being constrained by inadequate output from the coal, electricity, steel, cement and oil refining sectors.

India's economy has now grown at an average rate of 7% over the last four years, mainly driven by the services and industry sectors, but farming output has added impetus recently after some good monsoon rains.

Analysts said the Finance Ministry report, which comes a day before the government presents its annual budget, pointed to some risks ahead.

"Growth momentum remains strong and that should lead to higher inflation and interest rates," said Suchita Mehta, chief economist with Standard Chartered Bank in Mumbai.

Looking forward, the report said that the growing openness of India's economy and its increasing reliance on oil imports made it more susceptible to inflation pressures and the impact of rising interest rates around the world.

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