Prime Minister's Office on Friday said it was confident that the country would be able to record 6.5 per cent economic growth during the current financial year, but expressed concern over rising fiscal deficit and sharp appreciation in the rupee value.

"After October, we will see the impact of monsoon on growth. We will see demand pick up and take GDP growth to 6-6.5 per cent," S Narayan, the economic advisor to the Prime Minister, said at a meeting organised by the American Chamber of Commerce in New Delhi.

He said good monsoon was likely to have a favourable impact on agriculture while sectors like two-wheelers and white goods have also projected good sales in the third quarter.

"We are seriously concerned that there is a dent in export growth due to the appreciating rupee," Narayan said adding that India's forex reserves were strong at about $88.5 billion.

Highlighting mounting fiscal deficit as a major problem at the Centre and the states, Narayan said several steps like instruments of debt swapping, power sector reforms, NPA (non-performing assets) norms and corporate debt restructuring have been taken to contain the fiscal deficit.

The World Bank had warned India of staggering fiscal deficit at the Centre and states, which amounted to 11 per cent of GDP.

He said the financial sector was much "healthier now" which was reflected in increasing profits of companies.

Narayan, however, added that companies have a staggering Rs 50,000-60,000 crore (Rs 500-Rs 600 billion) of cash reserves, which they were forced to invest in government bonds and securities due to "shortage of investible resources".

Citing tariff policy as a problem, he said the government has considerably simplified it by reducing various levels of excise and customs duty, which would be rationalised further.

He asked for more foreign investment in the manufacturing sector besides services and financial sector but stressed that such investments should be able to add more value to local goods and services.

"We think we are on a growth path. It is important to sustain it. It can come from knowledge-based industries. We would also like to see global recognition of India as manufacturing base," Narayan said.

Noting that agriculture in India was more monsoon-dependent, he said there was a need to make it value-based through production of non-cereal products and usage of better techniques, research and money.