MUMBAI: India's economic growth will hit 7.2 percent for the fiscal year ending March, up from 6.7 percent the previous year, the government said Monday.

The forecast suggests that India's economic recovery is solidifying, thanks to a faster-than-expected industrial recovery, and gives the government space to begin withdrawing fiscal stimulus measures when it presents a new budget later this month. Still, the number came in below the Reserve Bank of India's forecast of 7.5 percent growth and disappointed investors, sending the benchmark Sensex index down 1.8 percent, to 15,652 points. The Ministry of Statistics said strong industrial growth has helped compensate for shrinking agricultural output, which was hit by widespread drought.

Agricultural output is likely to decline by 0.2 percent for the fiscal year, against 1.6 percent growth last year, the Ministry said. Industrial production has bounced back from the global downturn faster than expected, growing 7.7 percent for the April-November period, up from 4.2 percent for the same period the prior year. The Reserve Bank of India had forecast 7.5 percent growth for the fiscal year, while the International Monetary Fund predicted 6.75 percent growth. From 2003-2008, India's economic growth averaged 8.8 percent a year.