India c.bank: maintaining growth rate key challenge

MUMBAI, May 25 (Reuters) - The key challenge facing India's new ruling coalition is to maintain a strong growth rate, which has suffered in the face of the global financial crisis, the central bank's deputy governor Rakesh Mohan said on Monday.

"We have to observe that uncertainty in the world is still very high and we cannot ignore the fact that we are more integrated to the world than we used to be," Mohan told reporters.

The central bank expects the economy to expand about 6 percent in the current fiscal year ending March 31, 2010, lower from the previous year's estimate of 6.5-6.7 percent.

In the previous three fiscal years, Asia's third largest economy grew at 9 percent or more.

Mohan said while India's economy would continue to do well, expectations have to be realistic as the country cannot decouple with the rest of the world.

Merchandise exports contribute less than 15 percent of India's gross domestic product, reflecting the fact that the country is far less dependent on external demand for spurring growth than other Asian countries.

Still, the economy has been hit by the crisis much more than expected due to large services exports and increased integration of the financial sector, analysts say.

The government and the central bank have taken aggressive steps to revive the economy after the collapse of Lehman Brothers last year hurt sentiment across the world and depressed demand. (Reporting by Anurag Joshi; Editing by Stephen Nisbet)