Indian growth beats expectations

New Delhi: India's economy grew faster than expected in the March quarter, helped by strength in farm and services sectors that suggested Asia's third-largest economy has already turned the corner and may be set for an early recovery.

"The economy has clearly performed better than expectations despite very challenging credit conditions," said Han-Sia Yeo, currency and rates strategist at Australia and New Zealand Banking Group in Singapore.

The Indian economy grew 5.8 percent from a year earlier in January-March, matching the upwardly revised rate in the previous quarter, data showed on Friday. That was still the lowest in four years, but above analysts' forecast of a 5.2 percent annual expansion.

October-December growth was revised from 5.3 percent.

India does not publish seasonally-adjusted quarter-on-quarter growth figures, but analysts' estimates showed the economy grew 1.2 percent in the quarter compared with a stagnant reading in September-December.

In the whole of the 2008/09 fiscal year to March 31, India's economy grew 6.7 percent, its weakest in six years and well below rates of around 9 percent of the previous three years, but still faster than predicted by economists in a Reuters poll.

The data fanned hopes that India was already on the mend, unlike other major economies that suffered a disastrous January-March quarter and have yet to show hard evidence of improvement.

Unlike most Asian economies, which heavily rely on exports to sustain economic growth, India is driven by domestic demand. But it still suffered a sharp slowdown in late 2008 as job cuts at exporters and outsourcing firms as well as the drying up of investment flows soured consumer and business sentiment.