India's economy grew by 7.9% in the three months to the end of September
India's central bank has kept interest rates unchanged but increased cash reserve requirements for lenders in a bid to contain inflation.
The three quarters of a percentage point increase in bank reserves, to 5.75%, was more than expected.
The Reserve Bank of India also lifted its inflation forecast for the end of the financial year in March to 8.5%.
It also raised its forecast for economic growth for the year ending in March, from 6% to 7.5%.
India's economy grew 7.9% in the three months to the end of September 2009.
India's economy is recovering faster than expected, mainly driven by government spending, which analysts calculate could have contributed as much as 40% to 50% of India's total GDP growth in the year to September.
The Reserve Bank has pumped more than $125bn into the Indian economy since September 2008.