Finance minister on Wednesday pegged 2009/10 economic growth at around 7.75 percent, higher than the government's forecast, and a top adviser said the coming budget could provide a map for exiting stimulus measures.
Pranab Mukherjee said an annual 7.9 percent expansion in July-September, the fiscal second quarter, had boosted optimism.
"The growth outlook for the next two quarters and for the whole year is expected to be in the upper bound range of most predictions for the Indian economy," he said in a speech.
Mukherjee's projection is in line with the Reserve Bank of Indias growth forecast, but is higher than the Central Statistical Organisation's (CSO) advance GDP growth forecast of 7.2 percent.
Economists said the finance ministry and the RBI seem to be betting on better-than-expected growth in the final two quarters of the fiscal year. The CSO's forecast, released on Monday, will be revised in June.
Asia's third-largest economy has been picking up momentum, powered by industrial output that is expected to have risen an annual 12 percent in December.
The stronger growth is expected to allow the government to start rolling back fiscal stimulus measures that were put in place when the global economic crisis erupted in 2008.
"The budget can attempt a roadmap for exit," C. Rangarajan, chairman of the prime minister's Economic Advisory Council, told reporters.
India is scheduled to unveil the annual budget on Feb. 26.
The debt market did not react to Mukherjee's forecast as other policymakers, including Prime Minister Manmohan Singh, have announced the number several times before.
Earlier this month, the International Monetary Fund forecast growth in 2009/10 of 6.75 percent.
The markets have already priced in an increase in interest rates on or before the RBI's scheduled policy review on April 20, and dealers said the next big trigger would be the budget.
Central bankers have said the government's net borrowings for 2010/11 would be broadly in line with the current fiscal's net borrowing.
India had a record gross borrowing of 4.51 trillion rupees ($97 billion) in 2009/10.
Stronger economic growth could help the government fight a 16-year high fiscal deficit, thus lowering borrowing needs and easing pressure on bond yields.