India's economy posted a better-than-expected 5.3 per cent growth in the second quarter of 2001/02 on the back of its agriculture sector, which analysts said pointed to brighter growth prospects next year.

A government website on Sunday showed second quarter gross domestic product growth outstripped the 4.4 per cent in the preceding quarter, helped by expansion of 3.4 per cent in the farm sector compared with just 0.5 per cent a year earlier.

"It's better than expected. I had expected it to be around 4.9 per cent," Saumitra Chaudhury, economic adviser with credit rating agency ICRA Ltd, told Reuters.

While the figures indicated signs of recovery in the slowing economy, analysts said a rebound would hinge on stability in the region following the recent spiralling of tensions between India and Pakistan.

"There are signs of recovery due to good agriculture growth. But its longevity depends on stability. If there's a war, it will hurt," said D K Srivastava, economist with the National Institute for Public Finance and Policy.

Relations between the two nuclear-capable neighbours have soured since a suicide attack on India's parliament this month, which New Delhi blames on two Pakistan-based militant groups.

Both nation have massed troops and weapons along the borders, scaled down diplomatic relations and traded tit-for-tat sanctions.

Even though the second quarter GDP growth was lower than the 6.2 per cent recorded in the same period last year, the numbers left most analysts pleasantly surprised.

Most of them had expected growth to be hit by the global economic upheaval, especially after the attacks in the United States in September.

"Agriculture is doing the trick of pulling growth up. But other sec-

tors like manufacturing need to pick up," said Arun Kumar, economist with the New Delhi-based Jawaharlal Nehru University.

India's economy has been slowing with lower exports, revenue and industrial growth slipping. It grew 5.2 per cent in 2000/01 (April-March), down from 6.4 per cent a year earlier.

The services sector, the growth engine which contributes nearly 50 per cent to GDP, grew 7.5 per cent in July-September quarter against 8.5 per cent a year earlier, the figures of the Central Statistical Organisation showed.

But the manufacturing sector continued to be the worst hit, reflecting poor domestic demand and lower exports. It grew by a paltry 2.3 per cent compared with a healthy six per cent in the same period last year.

However, analysts said a pick up in other sectors in the coming months would pull up this crucial sector too.