India's economy has grown by 7.4% in the first quarter of the financial year - April to June.
Manufacturing industry has registered strong growth
The performance, which is better than expected, is said to have been driven by a good showing in manufacturing and service industries.
That has helped offset a relatively poor performance in the agricultural sector of the economy.
Analysts say an improvement in agriculture is crucial to sustaining the momentum for growth.
Agriculture accounts for nearly a quarter of India's economy with more than half its one billion population engaged in it.
"The downside is mainly on the agriculture front, while the good part of the growth story, which is manufacturing and services, is going strong," Rajeev Malik, economist at JP Morgan Singapore, told Reuters.
"So we believe India's growth story is still on track for achieving our full-year target of six per cent."
The Federation of Indian Chambers of Commerce and Indusry (Ficci) says "it will herald a good beginning for the current fiscal year".
"Ficci expects that well designed policy interventions to restrain the impact of oil prices and the rolling out of the promised reforms will help sustain the growth momentum into the year," it said in a statement.
Last year, India's economy grew at over eight per cent, one of the highest in the world and just a shade lower than its rival Asian economic giant, China.
Economists had projected a first quarter growth rate of 6.9% but the latest figures have topped that forecast.
While agriculture grew at 3.4% compared to 10.5% in the previous quarter, manufacturing grew at eight per cent.
Growth in the financial and real estate services sector was seven per cent.
Analysts say lower interest rates have meant that more people are buying cars and houses.
The strong figures appear to have spurred on the stock markets with the index of the benchmark 30-share Bombay Stock Exchange rising to 5581 points at noon, an increase of more than 60 points.