AGRA, India (Reuters) -- RBI Deputy Governor Rakesh Mohan said on Saturday he expected sustained growth in excess of 9.0 percent for the Indian economy.

India, Asia's fourth largest economy, is expected to grow by 9.2 percent in the fiscal year ending March 2007.

That would mark the country's fastest growth rate in almost two decades, underlining its increasing clout in the world economy as manufacturing and service firms power ahead.

India should become a trillion dollar economy by March 2008, Mohan told a fixed income conference in Agra.

"We should be a trillion dollar economy by next year, I mean 2007/08," Mohan said.

World Bank data show that at the end of 2005 only nine economies had a GDP of more than $1 trillion, with Brazil, South Korea and India the next closest with GDPs of almost $800 billion.

The government wants to raise sustainable growth to 9 percent and beyond in order to spread wealth to India's 260 million poor and generate revenue to bring down its large fiscal deficit.

Mohan said the combined deficit of the Central and state governments at 6 percent was still high by global standards.

India's economic growth has averaged 8.3 percent over the past three fiscal years. The government has also revised up growth for fiscal 2005/06 to 9.0 percent from 8.4.

But the red-hot pace is straining infrastructure and leading to a squeeze on capacity, which is fuelling inflation, now at a two-year high above 6.5 percent.

Mohan said India was moving towards more liberal financial market regulations but said the government securities market needed more liquidity.