Page last updated at 08:22 GMT, Monday, 30 November 2009

India's economy continues to grow

An Indian worker unloads vegetables
A poor monsoon season has raised fears of food price inflation

India's economy grew at a faster-than-expected rate of 7.9% in the three months to September, compared to the same period last year.

The growth was helped by government stimulus spending.

A boost in manufacturing and services helped the country expand at the fastest pace for 18 months.

Some analysts said this could give the central bank room to raise interest rates as early as December to combat rising inflation.

"This data could be a green light for the Reserve Bank of India to hike rates, and there are greater chances of this by the end of the calendar year," said Robert Prior-Wandesforde from HSBC.

"The exit from the fiscal stimulus by the government may also be earlier post-the GDP data," he added.

However, a government official said he expected no change in stimulus policy for the current fiscal year.

Farm output was up 0.9% in the third quarter but economists warned that the figures did not reflect the poor monsoon season.

The central bank warned that the poor season was more likely to drive food price inflation.



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