By Raymond Colitt

BRASILIA, April 10 (Reuters) - A Catholic Church watchdog group in Brazil on Thursday criticized President Luiz Inacio Lula da Silva's government over the record number of murders of tribal Indians last year.

Ninety-two indigenous people were killed in 2007, the Indigenous Missionary Council of the Roman Catholic Church said in a report. It was the highest annual tally since the council began monitoring such killings 20 years ago.

"The increase of violence is a reflection of the negligent and genocidal Indian policy of the Lula government," said Roberto Antonio Liebgott, the council's vice president.

In January the group had estimated that 76 indigenous people were killed last year.

The Lula administration has done too little to grant Indians their historic rights to ancestral lands, thereby exacerbating territorial clashes, the council said.

Many slayings occurred in overcrowded reservations in the southwestern state of Mato Grosso do Sul.

Indians are increasingly killing each other as they run out of living space, the report said, adding that most of the murders involved mutilation, multiple stabbing, beating or strangling.

The increased availability of drugs and rising levels of despair in the ghetto-like reservations also contributed to the high murder rate, the council said.

Brazil's Indian population now numbers about 750,000. It is estimated there were several million when Portuguese explorers first landed in 1500. But slaughter, disease and enslavement drastically reduced their numbers over the centuries.

Many big landowners say Indians are an obstacle to progress. They blame the Lula administration for encouraging land conflicts by promising them ancestral land rights.

But the council said the government was giving in to pressure from big business and politicians. It said the government agency for Indian affairs was grossly underfunded.

The government has said it created new Indian reservations and helped reduce child malnutrition among Indians. It also has partly blamed the judiciary for the delays in granting Indian land rights. (Reporting by Raymond Colitt; Editing by Xavier Briand)

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