India's annual economic growth accelerated to 7.0 percent in the final quarter of 2004/05 and while analysts expect momentum in services and manufacturing to continue, rainfall will be key to matching that pace this year.
India registered a record trade deficit last fiscal year as the expansion of Asia's fourth-largest economy pulled in more imports and the current account, the broadest measure of Indian trade, slipped into deficit for the first time in four years.
Growth in gross domestic product topped expectations in a Reuters poll for growth of 6.75 percent in the year through January-March, after 6.4 percent in October-December.
Growth for the year to March 2005 was 6.9 percent, in line with an earlier government estimate, data showed on Thursday.
Analysts expect the $600 billion-plus economy to grow about 7 percent in the year to March 2006, but say growth in the farming sector - generating a fifth of GDP and supporting more than 600 million Indians - will be subject, as usual, to erratic monsoon rains.
"The non-farm sectors are expected to maintain robust growth, but the distribution of monsoon is critical for this," said A. Prasanna, economist at ICICI Securities in Bombay.
Farm output grew an annual 1.8 percent in January-March, swinging from a fall of 0.5 percent in October-December.
Rain is crucial for rural incomes, which depend on crops grown on poorly irrigated farmland. Last year's erratic monsoon acted as a drag on the economy as farm output growth in 2004/2005 slowed to just 1.1 percent from 9.6 percent in 2003/2004.
After a slow start, monsoon rains this year have now covered the entire country, but analysts said timely rains in the sowing month of July will be crucial to full-year agricultural growth.
Manufacturing grew 8.6 percent in the year through the January-March quarter, slowing from 10.5 percent in October-December data. Full-year growth was 9.2 percent.
Services, which account for half of GDP, rose 9.3 percent on booming tourism and financial services, picking up from 8.8 percent in the year through October-December.
India does not release seasonally adjusted GDP data and figures released are provisional.