NEW DELHI -- The Indian government said economic progress in the first quarter of the current financial year has been "encouraging" and it expects "significant growth" in the months ahead.

"The economy is on a growth path that is in conformity with the budget projections," the finance ministry said in a three months to June report tabled in parliament.

"In summary, developments in the first quarter of the current (fiscal) year have been encouraging. Budgetary outcomes have largely been in line with expectations underlying budgetary estimates," it said. "This year should witness significant growth enhancement coupled with macro-economic stability."

Industry experts have forecast the economy is likely to grow 5.5-6.0 percent in the fiscal year 2003-2004 because near-normal monsoon rains are expected, coupled with sustained industrial growth, AFP reported.

The report, however, cautioned that some "pressure points" still exist in the economy, largely on account of subsidies on food and some petroleum products.

"Accelerated improvement in tax administration is already under implementation. No slippages shall be permitted in bringing about such improvements," it added.

The report said the seasonal monsoon rains have progressed well with 86 percent of average rainfall recorded so far.

"This should reverse the decline in agricultural output of last year, leading to a robust growth in this sector," it said. During the first two months of the current financial year, industrial production was up by five percent compared to growth of 4.1 percent registered in the corresponding period in the previous year, it said.

The fiscal deficit up to June 2003 was 386 billion rupees (82 million dollars), 9.52 billion rupees less than the previous year.

The report said the fiscal deficit was equivalent to 25 percent of the budget estimates as against the corresponding figure of 29 percent the previous year.

In the first two months of the fiscal year, exports grew 11 percent in dollar terms which, "in spite of the effect of SARS (Severe Acute Respiratory Syndrome) on world trade, augurs well," the report said.

It added that during 2002-2003, exports "performed exceptionally well", registering broad-based growth of over 19 percent in dollar terms.

"This rate is the second highest in the world next only to China and hoists India's share of world trade to a high of 0.8 percent," it said.

Imports were up by over 19 percent in the first two months which "clearly indicates a revival of economic growth in the country," the document said.

Foreign exchange reserves reached an all-time high of 84.9 billion dollars as of July 25, it added. CAPTION

Two women tend to the phones at one of India's growing number of call centers. A report of the Economist Intelligence Unit says China and India are likely to drive Asia's economy between now and 2007.