Indian economic growth should reach 5.5 per cent in the financial year ending March 2003, despite lower estimates released by the government last week, industrial federation FICCI said.

"We were optimistic about a 5.9 per cent rate of growth. At best due to the correction in the agricultural sector it can go back to 5.5 per cent," said Amit Mitra, secretary-general of Federation of Indian Chambers of Commerce and Industry.

The Central Statistical Organisation said on Friday the economy would grow 4.4 per cent this year as poor farm sector output pushed Asia's third largest economy to one of its lowest expansions since the country launched economic reforms in 1991.

Its first official estimate for the year was lower than a Reuters poll of 10 economists who had forecast 5.1 per cent growth. It was also below last year's growth of 5.6 per cent.

The CSO said the farm sector shrank 3.1 per cent due to poor monsoon rains after expanding 5.7 per cent in 2001-02, wiping out gains posted by the manufacturing and services sectors.

But Mitra said the farm sector, which contributes close to a quarter of the country's GDP, is not likely to be hit so badly. "Our own assessment of the drought, which FICCI surveyed, is that it is not extreme at all," he told a news conference on Saturday.

FICCI also said that in its quarterly business confidence survey for the third quarter of 2002-03, 71 per cent of 521 companies surveyed felt economic conditions were "moderately to substantially better" as compared to the last six months.

The respondents also felt their current performance was better as compared to the last six months.

Sixty per cent expect their industry to perform better in the next six months.

The CSO said the services sector, which has been a growth engine for the past decade, is expected to grow 7.0 per cent, as more people buy new cars and houses because of historically low interest rates. It grew 6.7 per cent in the previous year.

The manufacturing sector is expected to grow at 6.1 per cent.