Reserve Bank of India Governor Y.V. Reddy predicted that Asia's third largest economy, already one of the fastest growing in the world, would expand by around 7.0 percent, with an upward bias, in the year to March 2004.
The RBI's previous estimate was for growth of 6.5 to 7.0 percent.
"We made an upward revision in our growth assessment as several other indicators that pointed to acceleration in real economic activity were available," Reddy told a gathering of business leaders.
The revision comes as the Bharatiya Janata Party, which heads the ruling coalition, is considering holding national elections in April-May almost six months ahead of schedule to take advantage of a soaring economy and strong gains in key state elections.
The economy grew by 8.4 percent in the second quarter of the fiscal year 2003/2004, as it drew strength from robust growth in services, farm and factory sectors benefiting from the best monsoon rains in a decade.
Reddy said the central bank would not give any surprises to domestic financial markets, since it would maintain its soft and flexible rate stance announced in the November monetary policy review until the end of the financial year on March 31.
"Assuming that there are no unexpected adverse developments, there is merit in maintaining the status quo as far as the monetary and credit policy measures are concerned, while pursuing with the reform process," Reddy said.
The RBI had held the bank rate at a three-decade low of six percent after cutting it by two percentage points in a three-year easing cycle.
He said the Indian economy was robust enough to withstand pressures from recent adverse global developments due to record foreign exchange reserves and record grain production.
The new growth forecast is closer to the minimum eight percent growth needed to raise living standards for India's billion strong population, a quarter of whom live below the poverty line.