The Indian economy may grow at 7 percent in the current financial year backed by buoyant industry growth combined with an upside in agriculture output, Citigroup said, raising its estimate from 6.2 percent.

Citi has also revised its estimate of fall in agriculture output to 1 percent from 4 percent, helped by a higher share of commodities other than crops in the agri-GDP.

India's industrial output grew at its fastest pace in two years in November, strengthening the case for the central bank to tighten policy later this month to temper inflation expectations.

"Given the low base and signs of demand revival, we expect these trends to continue and maintain our view of 125 basis points of policy tightening in 2010 with a token hike later this month," Rohini Malkani and Anushka Shah, economists at the bank wrote in a recent note.

Citi expects industrial growth in the 9-11 percent range in the coming months, they added.

Citi also raised its 20010/11 growth forecast to 8.4 from 7.8 percent earlier.