UN's Economic and Social survey for Asia and Pacific on Friday warned that India's GDP growth is likely to slow down to 6.0 per cent this year after clocking 7.5 per cent in 2003, mainly due to lower farm output.

However, GDP growth is expected to accelerate to 6.6 per cent in 2005 and rise to 6.7 per cent in 2006 if the country continues the reforms and improves governance, the ESCAP survey for 2004 said.

Though the country achieved the highest growth rate in South Asian sub-region in 2003, it said, "India's agriculture sector is expected to slow down after its impressive performance in 2003."

Though India's economy grew faster than Asia-Pacific region taken as a whole during 2003, ESCAP said the country would lag behind the average 6.2 per cent expected to be seen in the region in 2004.

During 2005 and 2006, India will once again outsmart the average growth of 6.0 per cent in the Asia-Pacific region.

Despite an expected lower growth this year, India would still outperform its neighbours -- Pakistan (4.3 per cent), Bangladesh (5.7 per cent), Nepal (3.5 per cent).

Sri Lanka is expected to log 6.0 per cent growth in 2004, while Bhutan is likely to grow by 7.5 per cent.

These two countries are expected to grow faster than India in the next two years as well.

While forecasting a lower 6.0 per cent GDP growth for India in 2004, the UN body said inflation was likely to fall from 4.8 per cent in 2003 to 4.0 per cent this year and further dip to 3.5 per cent in 2005 and 3.0 per cent in the year after.

ESCAP attributed the 'significant' recovery in 2003 to bumper foodgrain harvest and sustained performance of industrial and services sectors.

"Another positive influence came from several fiscal and monetary incentives in the central government Budget for 2003 to boost industrial production and infrastructure development," ESCAP said.

Though it lauded government for rationalising both direct and indirect taxes on industrial products, cutting peak customs duty to 20 per cent and reduction in lending rates by commercial banks, it warned India of high fiscal deficit.

"The high levels of public debt are a major problem facing most countries in South Asia. India has accumulated substantial deficit-driven obligations as indicated by a rising public debt to GDP ratio of 71 per cent on March end 2003 compared to 64 per cent in March 2001," it said.

Estimating the debt-to-GDP ratio to remain at more or less the same level at the end of March 2004, it said, "A major part of the public debt in India consists of domestic debt obligations payable in national currencies."

ESCAP, however, noted that the Centre's fiscal deficit was expected to fall to 4.8 per cent of GDP in 2003, compared to 6.0 per cent in 2001 and 2002.