The country's economy expanded 7.6% in the July-September quarter, trouncing estimates of a 6.8% rise, data released on Thursday showed.

Stronger-than-expected growth in the first half of the year, along with continued government spending and some revival in private investment has prompted economists to raise their growth forecast to higher than the government's estimate of 6.5%.

"With 7.7% real GDP growth in the first half of 2023-24, the overall growth for full fiscal would be around 7%...though there are chances that it may cross the 7% mark," said Saumya Kanti Ghosh, chief economist at State Bank of India. He had an earlier forecast growth at 6.7%.

The government stuck to its 6.5% growth forecast for the year, but chief economic advisor V. Anantha Nageswaran said he was "more comfortable with an upside to this projection than before".

Citigroup revised its growth forecast for the financial year upwards by 50 basis points to 6.7% citing a pick-up in investment activity.

Gross fixed capital formation, an indicator of investment, rose 11% in the July-September quarter.

"This reaffirms our view of sustained investment recovery," the Wall Street bank's chief India economist Samiran Chakraborty said in a note.

"While the 13.3% growth in construction gross value added indicates public infrastructure/residential capex led investment growth - such strong gross fixed capital formation data might also suggest an element of private capex recovery," Chakraborty said.

DBS now sees growth in the current financial year at 6.8% from 6.4% earlier.

"There was a broad-based improvement in investments, reflecting higher state and centre spending alongside recovery in the real estate sector and inventory demand ahead of festivities," said economist Radhika Rao in a note.

"This made up for the softness in consumption spending and a negative contribution by net exports".

Consumption remained weak, growing just 3.1% in the second quarter of the year signalling that parts of the economy are still to recover.

"Rural demand remains weak, reflecting low real wage growth and uneven monsoon," said Gaura Sen Gupta, economist at IDFC First Bank Economics Research, which has upped its growth forecast for the year to 6.7% from 6.2% earlier.

(Reporting by Ira Dugal; Editing by Nivedita Bhattacharjee)