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Last Updated: Friday, 30 November 2007, 07:55 GMT
Indian economic growth rate eases
Crowds in a Mumbai street
Rising income in India has helped the economy grow
India's economy grew at an annual rate of 8.9% between July and September, beating market expectations but a slowdown on the previous quarter.

The fall from the 9.3% growth seen between April and June was caused by a slowdown in manufacturing output.

Factory output, a key driver of India's past four years of rapid economic growth, grew 8.6% in July to September, down from 11.9% in April to June.

The slight slowdown will please Delhi, which has sought to cool inflation.

Services growth

With the Indian economy now the world's second fastest-growing after China, India's central bank has moved several times to cool this growth and reduce inflationary pressures.

In addition to five interest rate rises from mid-2006 to March of this year, the Reserve Bank of India has increased the amount of funds commercial lenders must keep in reserve rather than lend out.

The latest tightening of this so-called cash reserve ratio came at the end of last month.

Such a move helps to reduce inflation, as it cuts the amount of rupees in circulation.

While manufacturing growth eased during July to September, the services sector grew by 10.2%, and farming expanded by 3.6%.

"We will see further moderation in the coming two quarters...the impact of rate tightening is now being felt and it will intensify," said DK Joshi, principal economist at rating agency Crisil.

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