India’s economy grows 7.9% on year

India’s economy expanded at a rate of 7.9% in the third quarter compared with the same period a year ago - the fastest pace for Asia’s third-largest economy in 18 months.

The growth exceeded economists expectations and was boosted by the manufacturing and services sectors.

Manufacturing output grew 9.2% in the July to September period as consumers increased their spending on purchases of cars and other goods.

Meanwhile, farm output was up 0.9% in the period but analysts warned that a fall could be seen in the current quarter as a result of the poor monsoon season, which will fuel food price inflation.

According to analysts, the strong growth figures will mean the central bank has the room to hike interest rates next month in order to stem rising inflation.

Last month, the Reserve Bank of India commenced its exit from its monetary policy by withdrawing some of the liquidity support measures which were introduced to boost the economy during the downturn.

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