INDIA BONDS-India bond yields seen tad lower after weaker-than-expected growth

MUMBAI, March 1 (Reuters) - Indian government bond yields are expected to fall marginally in the early session on Wednesday, as weaker-than-expected growth may force the central bank to rethink its monetary policy tightening stance.

The 10-year benchmark 7.26% 2032 bond yield is expected to trade in the 7.42%-7.48% band, after closing higher at 7.4623% on Tuesday, a trader with a private bank said.

The yield rose 12 basis points in February, the biggest monthly rise since September.

"Weaker growth should at least make a case for the Reserve Bank of India to consider the impact rate hikes are having on the growth front," the trader said.

Economic growth slowed further in the December quarter as pent up demand eased and weakness in the manufacturing sector continued. Asia's third-largest economy recorded year-on-year growth of 4.4% in October-December, down from 6.3% in July-September.

October-December growth was below a Reuters forecast of 4.6%, and also partly due to a fading of pandemic-induced base effects and revision to last year's growth, economists said.

The government, however, retained its growth forecast of 7% for 2022/23, while revising growth for the previous year to 9.1% from the earlier 8.7%.

"Growth number is broadly in line with RBI's projections, and is unlikely to shift RBI's projections materially," Barclays said in a note.

"Following a set of hawkish minutes and the inflation overshoot in January, we think that the balance of risks has tilted towards another hike," the bank said, adding it expects a 25 bps hike in April.

The RBI has raised the repo rate by 250 basis points in the current financial year to 6.50%. However, two external members of the monetary policy committee, Ashima Goyal and Jayanth Varma, said further hikes are not needed and the MPC must wait to assess the impact of its past rate increases. KEY INDICATORS: ** Brent crude futures contract at $83.80 per barrel ** 10-year U.S. Treasury yield was at 3.9376% and the two-year note at 4.8345% ** RBI to auction Treasury Bills worth 390 billion rupees ($4.72 billion) ($1 = 82.5970 Indian rupees) (Reporting by Dharamraj Dhutia Editing by Eileen Soreng)