NEW DELHI, INDIA - India's economy could grow more than 7.0 percent this year, but the expansion will rely on a recovery in the United States and the global economy as a whole, the government said Thursday.

"The speed at which the Indian economy returns to a high growth path in the short-term depends on a revival of the global economy, particularly the US economy," it said in its annual Economic Survey tabled in parliament.

Growth could be as little as 6.25 percent if there are delays in a US turnaround, the report said.

India?s 1.2 trillion dollar economy expanded 6.7 percent in the year ended March 31, the slowest pace since 2003.

The Finance Ministry survey said a return to the level of nine percent annual growth that India enjoyed prior to the global financial meltdown could only be achieved with sweeping economic reforms.

"India should be back on the new trend growth path of 8.5 to 9 percent per annum provided the critical policy and institutional bottlenecks are removed," the report said.

For the current fiscal year, the report estimated growth of between 7.0-7.75, but stressed the importance of reining in India's fiscal deficit which ballooned to 6.2 percent last year as the result of government spending aimed at protecting the economy from the global downturn.

The survey, tabled ahead of the federal budget on Monday, said the deficit needed to be brought back to 3.0 percent of GDP.

Any recovery in the domestic economy is likely to be aided by favorable external factors such as a pickup in trade and resumption of capital inflows into the stock market, the survey said.

Hopes of the Indian economy reviving faster than many other Asian nations have led to an inflow of 5.0 billion US dollars from foreign funds since January, with the benchmark Sensex index at the Mumbai stock exchange up more than 50 percent since then.

While there are tentative signs of a recovery in the global economy, the survey warned that the recent rise in commodity prices, including that of crude oil, may work against a revival.

"That makes it difficult to forecast short- to medium-term growth prospects," it said.

The survey urged a thorough review of the government's divestment policy and suggested that loss-making state-run enterprises be auctioned off.

It also called on the government to allow 49 per cent foreign equity in defence production and 100 per cent in high-technology defence equipment, and to open the Indian market to multi-brand retailing. --AFP