AFP - India's economy has withstood the global financial crisis well and should grow by 6.5 percent this fiscal year, a top government panel forecast Wednesday.

The panel, which advises India's Prime Minister Manmohan Singh on economic policy, put the estimated growth range for the country between 6.25 percent and 6.7 percent for the fiscal year ending March 31, 2010.

But "our best estimate is that the economy will grow by 6.5 percent," C. Rangarajan, chairman of the Economic Advisory Council, said.

He forecast growth for next year at between seven and eight percent.

"The economy has weathered the financial turbulence quite well," the former central bank governor told reporters in New Delhi.

The projected growth rate would make India's economy "possibly the second-fastest growing in the world," he said.

Asia's third-largest economy had faced the "full fury of the international crisis" last year but this year should face a "global situation that might be better," he added.

Rangarajan said he expected the central bank would continue its "highly accommodative" monetary policy for the current financial year but that next year would need to change its stance as inflation picks up pace.

He said the timing of interest rate increases from current record lows would depend on "growth prospects and inflationary pressures."

The panel forecast that inflation, now still below one percent, would accelerate to six percent by the end of the financial year, stoked by rising food prices as a result of the worst monsoon rains in nearly four decades.

India's economy grew 6.7 percent last year, sharply below the annual nine percent levels it had logged during the three previous years, as it was hit by the global economic slump.

The panel forecast India's consolidated fiscal deficit would rise to 10.09 percent in this financial year from 8.6 percent last year as a result of stimulus measures to boost the economy.