NEW DELHI - INDIA'S economy could grow more than 7.0 per cent this year, but the expansion will rely on a recovery in the United States and the global economy as a whole, the government said on Thursday.

'The speed at which the Indian economy returns to a high growth path in the short-term depends on a revival of the global economy, particularly the US economy,' it said in its annual Economic Survey tabled in parliament.

Growth could be as little as 6.25 per cent if there are delays in a US turnaround, the report said.

India's US$1.2 trillion (S$1.74 trillion) economy expanded 6.7 per cent in the year ended March 31, the slowest since 2003.

The Finance Ministry survey said a return to the level of nine per cent annual growth that India enjoyed prior to the global financial meltdown could only be achieved with sweeping economic reforms.

'India should be back on the new trend growth path of 8.5 to 9 per cent per annum provided the critical policy and institutional bottlenecks are removed,' the report said.

For the current fiscal year, the report estimated growth of 7.0-7.75, but stressed the importance of reining in the fiscal deficit, which ballooned to 6.2 per cent last year as the result of government spending aimed at protecting the economy from the global downturn.

The survey, tabled ahead of the federal budget on Monday, said the deficit needed to be brought back to 3.0 per cent of GDP.

Any recovery in the domestic economy is likely to be aided by favourable external factors such as a pickup in trade and resumption of capital inflows into the stock market, the survey said.

Hopes of the Indian economy reviving faster than many other Asian nation have led to an inflow of US$5.0 billion from foreign funds since January, with the benchmark Sensex index at the Mumbai stock exchange up more than 50 per cent since then. -- AFP