India's economy expands...

Indian Prime Minister Manmohan Singh had predicted 7.5 percent growth for the current fiscal year through March 2006, and said the country should aim to accelerate the pace to 10 percent in two to three years.

The government said that India's economy "expanded 8.1 percent in the April-September period compared to a year ago, lifted by strong manufacturing and buoyant growth in tourism and financial services", reported Associated Press from New Delhi.

This was also a surprise for many analysts, who had expected growth to slow through the year because of high oil prices and suspected sluggish exports.

But government data showed manufacturing growth averaged 10.2 percent during the period despite a slowdown in the second quarter, while services continued to remain as robust. Financial and real estate services grew 9.1 percent in the six-month period from a year ago.

Singh said his government was giving a big push to agriculture, which has long been a drag on the broader economy.

"The numbers are stronger than expected," said Rajeev Malik, an economist with JP Morgan & Co. based in Singapore. "We will probably raise our full-year growth forecast to 7.5 percent from 7.2 percent predicted earlier."

Malik said most analysts had earlier expected manufacturing output would grow much slower in the second quarter than the first quarter, but the data showed that hasn't happened.

"Services were even a bigger surprise," he said. The most buoyant segment in this sector was the hotel and transport industry that expanded 12.2 percent in the April-September period compared with the same period last year. Hotel and transport services apparently were driven by increased tourist arrivals.

Optimism about India 's economic potential has lifted the nation's stock market to records, with the 30-share benchmark index of the Bombay Stock Exchange - the Sensex - crossing the 9,000 points mark for the first time on Monday.

The stock rally since late April has been driven by foreign funds which have pumped a record $8.5 billion (euro7.2 billion) into Indian shares.

Overseas investors are increasingly looking to India , which has been one of the world's fastest growing economies over the past decade and is increasingly opening up to foreign competition.

[Courtesy: Associated Press]