India growth forecast up

By Swati Bhat

MUMBAI (Reuters) - India's economic prospects have brightened in recent months, prompting analysts to raise their 2009/10 growth forecast, but the economy is still expected to post its weakest performance in seven years.

Analysts in a Reuters poll raised their median forecast for growth in Asia's third-biggest economy to 6.3 percent for the year to the end of March 2010 from a forecast of 5.7 percent in a similar poll three months ago.

However, that is below 6.7 percent in 2008/09 and would be the weakest rate since the economy grew 3.8 percent in 2002/03. The government expects growth to pick up to 7 percent in 2009/10, or FY10, as the economy recovers from the global downturn.

"Growth is expected to remain low in FY10 owing to the weakness in consumption and investment spending," said Gunjan Gulati, an economist with JP Morgan Chase.

"External demand also remains sluggish, as evident from still contracting exports."

Growth will pick up to 7.2 percent in 2010/11, helped by stimulus measures including large rate cuts, increased government spending and tax cuts, the poll shows.

"Demand-led domestic recovery and a gradual pick-up in global economic activity would make it possible for growth to rebound in FY10/11," Rupa Rege Nitsure, chief economist at Bank of Baroda, said.

With signs that the worst of the slowdown is over, most economists think the central bank has finished cutting interest rates after aggressively lowering them between October and April.