India's economy is strengthening

World Bank country director for India Michael Carter said: "India is set to achieve impressive growth as the potential is enormous.

He gave his prediction to a development forum in New Delhi, the Agence France Presse news agency reported.

India is recovering from a drought which damaged agriculture last year.

'Significant gains'

A key United Nations regional development agency also praised India's success in boosting economic growth on Friday.

India's strong performance was driving growth in South Asia, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) said in its annual report.

"The Indian economy seems to have boosted its GDP (gross domestic product) growth significantly over the last few years, not withstanding slow progress in fiscal and structural reform," UNESCAP said.

India is expected to achieve 7% growth in the year to March 2004.

Drought crippled Indian agriculture in the year to March 2003, helping to cut GDP to 4.3% from 5.6% in the previous fiscal year.

India needs rapid economic growth in order to fight poverty and pay for education and welfare programmes.

Foreign investment has risen in recent years. However, government privatisation plans for sensitive industries - such as oil refining and airlines - have run into domestic political opposition.

India's economy is cushioned against external shocks such as exchange rate or oil price fluctuations by huge foreign exchange reserves of more than $100bn.