Mumbai: India's economy grew at nine per cent in fiscal 2008, helped by surging agricultural production, although GDP growth slowed to 8.7 per cent in the last quarter of 2007-08 following a sharp slowdown in manufacturing sector.

The growth rate was faster than the initial estimate of 8.7 per cent, but slower than last year's pace of 9.6 per cent, finance minister P Chidambaram said.

But, with a sharp slowdown in manufacturing growth in the January-March quarter and a rise in energy costs, he said, the current fiscal year would be more difficult.

He said the economy is expected to grow at an annual rate of 8.5 per cent. ''There is no reason why GDP growth should fall below 8.5 per cent in the current fiscal year," Chidambaram said.

While noting that inflation may not yet have peaked out with no signs of prices moderating, Chidambaram said the government and the Reserve Bank of India (RBI) would take all possible measures to curb inflation and boost industrial growth.

He said the impending increase in fuel prices will stoke inflation, but only in the short-term.

The saving grace is a buoyant agricultural sector which, in fact, helped elevate economic growth to 9 per cent, up from the 8.7 per cent estimated previously.

The government attributed a rise in GDP growth rate to the revision in the estimated production of agricultural crops by the department of agriculture and cooperation.

Agricultural and allied activities grew by 4.5 per cent, as against the earlier estimates of 2.6 per cent, at a time when manufacturing sector growth came down to 8.8 per cent from 9.4 per cent.

The agricultural sector contributes 17 per cent to the GDP, and is a key sector driving the Indian economy. The higher growth in agriculture has been driven by record output of wheat, rice, coarse grains, pulses, oilseeds and cotton in 2007-08.

See: Details of revised estimates of annual national income, 2007-08 and quarterly estimates of gross domestic product, 2007-08