BOMBAY -- Finance Minister Jaswant Singh said Thursday India's economy had already absorbed the fallout of the Iraq war.

"We have absorbed the shock and contained the difficulty arising from the Persian Gulf War," Singh told India's top bankers in Bombay, the country's commercial hub.

"Most of the oil volatility has been absorbed and I feel oil prices will begin to soften further," the finance minister said.

India imports 70 percent of its crude oil needs and fluctuation in petroleum prices often hits the country's fiscal balance sheet.

India last month stitched together a plan with non-Persian Gulf states for the import of oil for almost two months in the hope the period would help it weather out the military conflict.

Singh's assertion came a day after the World Bank warned that India's economic growth in the fiscal year beginning began April 1 would depend on the duration of the war in Iraq, where coalition forces are said to be making progress.

"India's gross domestic product growth depends on the outcome of the war. If war continues for a long time and oil prices continue to rise, it could affect the country," said William Shaw, World Bank economist.

Singh also said the local economy was critically placed and future growth would be rapid.

"We have reached a stage of criticality in the Indian economy. we will achieve growth in the years to come as never witnessed earlier," he told the bankers.

India's economy had faced a drought last year, emerging challenges from terrorism, the Iraq war and an overall downtrend in global economy, he said.

"Despite this, the 4.4 percent growth in GDP seen in year to March 2003 under these circumstances for a continental size of economy is indeed a good performance," he said. "It is next only to China in the world. And I would be happy if we can better it."

Singh said the impact of the 1991 Persian Gulf War on the Indian economy was different to that of the ongoing conflict.

"Between 1991 and 2003 there is a world of difference. There is no exodus of Indians from Persian Gulf this time as it was in 1991," he said of the previous war when 115,000 Indians fled the region. "Similarly, we had severe difficulty in meeting (oil) imports at that time, with ability to meet only 15 days imports. We had to mortgage gold then. But today we have over $75 billion forex reserves." (AFP)