NEW DELHI (AFP) - India's economy in the April-June quarter expanded 7.4 percent from a year ago as growth in manufacturing and tourism offset a slowdown in the key agriculture sector, official data showed.
Economists said the figure beat market expectations.
"I think it is a very auspicious start for the new government," said Rajiv Kumar, chief economist at the Confederation of Indian Industry.
The farm sector expanded just 3.4 percent in the June quarter down from a 10.5 percent rise in the March quarter, a statement by the Central Statistical Organisation said.
The slowdown in June quarter farm output was due to delay in the start of the annual monsoon rains which usually arrive in early June.
The slowdown in agricultural output was offset by a surge in manufacturing, which expanded a robust 8.0 percent in the three months to June.
The hotel, transport and communications sector rose 11 percent in the quarter amid an aggressive drive by India to encourage more visitors.
India's economy grew 8.2 percent in the year to March 2004 on the back of the best monsoon in a decade which boosted agriculture. Some 70 percent of India's billion-plus people depend on agriculture directly for their living.
The government of Prime Minister Manmohan Singh, a former World Bank economist, previously said that growth of between 6.2 percent and 7.4 percent would be "acceptable" for the fiscal year to March 2005.
Singh has battled to control inflation, currently at three-and-a-half year highs, while seeking to fulfil campaign promises for heavy investment in rural infrastructure.
The better-than-expected data boosted sentiment on the Bombay Stock Exchange, with the benchmark Sensex index ending up 1.01 percent Thursday.
"We hope this momentum will be sustained and it can be sustained if inflation is properly addressed without hiking interest rates which will dampen growth," Kumar said.
The data came a day after the International Monetary Fund predicted growth in India would come in at 6.4 percent this year, while warning that huge budget deficits could undermine future economic gains.
The IMF noted that revenue collection was likely to slip below target this year after the government cut duties on petroleum products and steel as part of efforts to fight inflation.
The Federation of Indian Chambers of Commerce and Industry (FICCI) hailed the latest GDP figure as a "good beginning" for the fiscal year.
"FICCI expects that well-designed policy interventions to restrain the impact of oil prices and the rolling out of promised reforms will help sustain the growth momentum into the year," it said in a statement.
The figures were also released the day before Finance Minister Palaniappan Chidambaram makes a presentation on India's economy to the IMF and World Bank in Washington.