The Confederation of Indian Industry has pegged the country's economic growth at 6.5-6.8 per cent this fiscal backed by a rebound in agriculture and continuance of a robust growth in the industrial and services sectors.

"In view of our revised agricultural growth estimates for 2003-04, we are revising up our GDP (gross domestic product) growth forecast to a range of 6.5-6.8 per cent," CII said in its report 'State of the Economy' released on Sunday.

This is based on the projection that agriculture will grow by 4-5.5 per cent, industry by 6.5 per cent and services by 7.5 per cent in this fiscal.

The GDP growth had been 'disappointing' last fiscal due to poor performance of the agriculture sector because of deficiency in monsoon, but the downturn seemed to be over, it said.

"In view of the expected rebound in agricultural growth, we are revising up our estimates from 2-4 per cent to a more realistic range of 4-5.5 per cent," CII said, indicating that foodgrain production may go up by as much as 11 per cent in this fiscal.

Dismissing claims that upswing in industry may not be sustained, CII said: "The upswing has just begun and has some way to go before it peaks." Industry would grow by 6.5 per cent this fiscal compared to 6.0 per cent last fiscal, it added.

On the price level, CII said "average inflation for 2003-04 is likely to be around 5.0 per cent while inflation in manufactured products is likely to be lower at around 4.5 per cent."

The confederation expressed concern over the government's gilt buyback programme saying "it will add to the fiscal deficit."

While the net present value of savings works out to Rs 10,000 crore (Rs 100 billion), it cost the government Rs 14,000 crore (Rs 140 billion) for swapping the high cost debts with low cost ones.

"Clearly, the exercise has not been worth it for the government," it said.

However, the business chamber expressed dismay over the appreciating rupee and said the rise in rupee along with high interest rates was encouraging "interest rate arbitrage", which in turn was putting further pressure on the currency.

It said that the equities market was on a roll and was showing signs of life with the BSE Sensex breaking the 3,500 barrier, after a long period of stagnation.

The revival of the market was due to good corporate results, Maruti IPO and increase in foreign institutional investments to $1.2 billion in the first six months of this year.

Banks have also shown good financial results with net profits rising by 53 per cent to Rs 9,460 crore last fiscal.

The confederation also pointed to the failure of banks to meet the Reserve Bank of India directive in meeting investment fluctuation reserves.

Corporate results show net profits of major manufacturing companies were up by 74.4 per cent this fiscal while it was down by 12.7 per cent for services companies.