AFP

New Delhi, May 29: India's economy expanded by a stronger-than-expected 6.7 percent in the past fiscal year, giving a boost to the newly re-elected government, which aims to restore growth to scorching levels.

The figure for the 12 months till the end of March 2009 was, however, still down from the nine percent posted a year earlier due to the global downturn but better than analysts' forecasts which were mostly in the range of 6.0 to 6.5 percent.

Shares rose on the news with the benchmark Sensex index of 30 leading stocks was up 2.60 percent or 371.76 points at 14,667.77.

Growth was lifted by an unexpectedly robust performance in the fourth quarter of 5.8 percent on the back of government spending and aggressive rate cuts by the central bank. The fourth quarter performance was, however, down compared to 8.6 percent in the same year-earlier period.

The numbers were welcome news for the Congress-led government, which was swept back to power earlier this month on a poverty alleviation platform.

"What you're seeing in these better-than-expected figures is essentially the effects of government spending, which is showing up in social and community services and construction," said D.K. Joshi, principal economist at leading Indian credit rating agency Crisil.

Finance minister Pranab Mukherjee has said the government will make lifting growth its top priority to help India's "common man" -- even at the risk of ballooning the country's already large fiscal deficit.

New Delhi is hoping to return growth back to levels around nine percent seen before the global financial crisis hit, and possibly push into double-digits.

The government says it needs such growth levels to lift hundreds of millions of Indians out of poverty.

Friday's full-year figures were also helped by an upward revision of third-quarter growth to 5.8 percent from 5.3 percent and a stronger performance in the farm sector.

Agriculture accounts for nearly 20 percent of gross domestic product (GDP) and provides a living for two-thirds of the population.

Analysts say the economy has been showing signs of a rebound, with car sales and cement output up due to interest rate cuts and a series of stimulus packages introduced by the previous administration.

Eyes will now keenly be on the government's budget, expected in early July, to see how quickly it moves ahead on economic reforms such as disinvestment and opening up the financial sector to more foreign firms.

India has weathered the international slump better than many nations because of its still relatively inward looking economy, which has only opened up slowly since 1991.