NEW DELHI, May 31: India's economy grew faster-than-expected at a record 9.4 per cent pace in the year to March, beating a government forecast of 9.2 per cent Thursday and raising hopes of more foreign investment.

The record-breaking performance was driven by upward revisions to manufacturing and services output in previous quarters and a jump in overseas investment, the central statistical organisation said.

In the previous fiscal year, India's economy grew 9.0 per cent.

Analysts had forecast that strong industrial growth and a boom in services, such as outsourcing would lift growth to as high as 9.4 per cent despite a series of interest rate hikes in the fiscal fourth quarter to tame inflation.

“No real surprises in the growth numbers; we expected that manufacturing growth would lead the charge,” said Bidisha Ganguly, chief economist with brokerage BRICS Securities.

The government said the economy grew 9.1 per cent in the three months to March and that the previous three quarters of the fiscal year had been revised upwards as new data became available.

The country had reported growth of 10.47 per cent in the year ended March 1989.

But the figure is considered an aberration by analysts who note that growth in the 1980s averaged around four per cent annually and data then was not adjusted for inflation and exchange rates used now in a more detailed method.

The benchmark 30-share Sensex index closed up 133.08 points or 0.92 per cent to 14,544.46, not far from its intraday record of 14,723.88 set on Feb 9.

“The overall Indian equity markets outlook looks strong with more money expected to pour in from overseas and local funds,” said Shitin Desai, vice chairman of DSP Merrill Lynch, after the data.

The rupee, which has gained almost nine per cent against the dollar this year ended at 40.73 to the dollar, slightly weaker than Wednesday's close.

Growth in India is well behind Asian rival China of 10.7 per cent in 2006 but the governments of both billion-plus population nations have warned of overheating in their economies and taken steps to tame demand.

In India, analysts expect a dip in growth this year linked to tight monetary policy and government directives to banks to be cautious on loans, especially for housing and construction, so as to dampen demand for commodities such as cement and steel.“Going forward, domestic consumption could slow down along with exports. We have been growing too fast in recent months anyway,” said D.K. Joshi, chief economist with rating agency Crisil.—AFP