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NEW DELHI, May 31 (Reuters) - The Indian economy grew 7.7 percent year-on-year in January-March, its quickest pace in almost two years driven by higher growth in manufacturing, the farm sector and construction. But this did not prevent GDP growth, at 6.7% in 2017-18, from falling to its lowest rate in four years.

Finance Minister Piyush Goyal said the 7.7 per cent GDP growth showed the economy was on right track for higher growth in the future. "Rapid growth in agriculture (4.5 per cent), manufacturing (9.1 per cent) and construction (11.5 per cent) contributed to the overall growth", the Central Statistics Office (CSO) said in its national accounts data released today. He said, good growth in the fourth quarter has reflected in GDP numbers. The GDP growth was 6.1 per cent in January-March quarter in 2016-17.

Around two-thirds of economists in the poll who answered an extra question said growth would continue at roughly the same pace through the fiscal year that began on April 1. The key indicators of banking, namely, aggregate bank deposits and bank credits showed a growth of 6.7 per cent and 10.3 per cent, respectively, as on March 31 this year. For the whole year 2017-18, the growth rate declined to 6.7 percent compared to 7.1 percent last year.

The rate is higher against 5.6 percent, 6.3 percent and 7.0 percent respectively, in the first three quarters, Q1, Q2 and Q3 of 2017-18.

Mining and quarrying did not perform well in January-March as GVA of the segment grew at 2.7 per cent in the fourth quarter, down from 18.8 per cent in the year-ago period. Mr Garg said, he does not see oil prices impacting growth and added that fiscal deficit will be within 3.5 percent target.

The industry body has emphasised the need to sustain the growth momentum, while suggest the policy makers to take steps to revive private investments following the recent push to accelerate infrastructure spending as well as to improve the business climate and (eventually) less leveraged corporate and banks' balance sheets.

If the poll is right, January-March would have the fastest expansion since before the government's surprise decision in November 2016 to scrap high-value currency notes and a botched implementation of a goods and services tax (GST) in July past year stalled growth.

At the sectoral level, the growth rate of GVA at constant (2011-12) prices in Q4 of 2017-18 for agriculture and allied sectors, industry and services sectors are estimated at 4.5 percent, 8.8 percent, and 7.7 percent respectively.

"While Indian economy is in cyclical recovery led by both investment and consumption, however, higher oil prices and tighter financial conditions will weigh on the pace of acceleration", Assocham secretary general D S Rawat said.