NEW DELHI -- India's economy expanded 6.1% in the April-June quarter compared with a year earlier, as it gathered momentum on public spending and interest-rate cuts.
A widening drought, however, could weigh on the country's nascent rebound.
The increase in economic output in the quarter ended June 30 -- the first in India's fiscal year -- was driven by trade, hotel and transportation services, as well as by mining and manufacturing.
It followed a year-to-year rise of 5.8% in the January- March period, the Central Statistical Organization said Monday.
The figures for the latest quarter were in line with expectations and show how Asia's third-largest economy is emerging from the global slump in better shape than many of its regional peers.
India has maintained relatively fast growth in 2009 despite steep downturns elsewhere, because exports play a relatively small role in the rural-based economy. The government also has ramped up spending -- increasing its debt burden -- to spur activity.
Indian government officials said economic growth, which sagged in the global financial crisis, would pick up in coming quarters, buoyed by increased output in manufacturing and services sectors.
Finance Secretary Ashok Chawla predicted growth will exceed 6.5% this fiscal year, which ends March 31, 2010, although he said it is difficult now to assess the impact of delayed rainfall on India's agriculture-dependent economy.
The Reserve Bank of India expects the economy to expand 6% with an "upward bias," while the federal government has forecast growth between 6.25% and 7.75%.
But analysts say the poor start to the June-to-September monsoon season has clouded India's near-term economic outlook. More than one-third of India's 625 administered districts have declared drought, and analysts warn that weak rains will likely crimp output of summer-sown crops and squeeze rural incomes. This will likely depress demand for everything from motorcycles to mobile phones.
"India will find it difficult to sustain on-year GDP growth of over 6% in the remaining three quarters of the current fiscal year in view of the monsoon setback," said Rupa Rege Nitsure, chief economist at Bank of Baroda.
Morgan Stanley economist Chetan Ahya estimates farm-sector output might contract between 2% and 4% this fiscal year, which would make full-year economic growth range between 5.2% and 5.8%.
The government is trying to support the agriculture sector by increasing the minimum selling price of rice and sugar. It also has offered to subsidize diesel for farmers to bring down irrigation costs, and provided additional electricity to key farming provinces, such as Punjab and Haryana.
Analysts said the latest GDP numbers are unlikely to prompt any shift in the central bank's neutral policy stance, with signs of improvement in the economy offset by the need to keep rates low -- to help the bond market absorb a glut of public debt and on concerns over damage from the monsoon.
Growth in the latest fiscal year slowed to 6.7% from 9% for the year ended March 2008, missing a government forecast for a 7.1% expansion.
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