India has reported its best growth figures in more than a year, beating economists' predictions and suggesting Asia's third largest economy is fast emerging from a slowdown caused by the global financial crisis.

India's economy grew by 7.9 per cent in the three months to September, the government figures, released on Monday, showed.

Analysts had expected the economy to grow at only 6.3 per cent, following on from growth of 6.1 per cent in the April-June quarter, according to a poll by Dow Jones Newswires.

"As upside surprises go, this was a big one," Robert Prior-Wandesforde, an HSBC economist, was quoted by the AFP news agency as saying.

India's expansion, the strongest quarterly performance since early 2008, was bolstered by rising industrial production and government stimulus measures designed to combat the global downturn.

The figures show manufacturing in India surged by 9.2 per cent while government spending on roads and other projects climbed by 12.7 per cent.

'Significant improvement'

Government spending in total rose 26.9 per cent, while private consumption increased 5.6 per cent, in constant currency terms, from the same quarter a year ago.

The growth comes despite the worst summer monsoon since 1972 hitting India's agricultural sector - growth in agriculture, forestry and fishing was just 0.9 per cent for the quarter, the figures showed.

While less than 20 per cent of India's gross domestic product comes from agriculture, some 65 per cent of the population relies on farming for their livelihood.

Montek Singh Ahluwalia, the deputy chairman of India's planning commission, said the rise had caused the board to increase its estimates for the year to March 2010, although he did not say by how much.

"In the rest of the year we could see [more] significant improvement than expected," he told reporters in New Delhi.

Regional rivalry

Figures for the Asian region as a whole have been strong as countries pull out of the financial downturn.

Regional rival China grew by 8.9 per cent in the third quarter, the fastest pace in a year.

Analysts said the strong Indian numbers would fuel debate over when the central bank should raise benchmark borrowing rates as it seeks to fight inflation and keep the economic resurgence on track.

But economists said the odds were still tilted in favour of interest rates remaining on hold until January while the central bank waits to ensure the strong growth is entrenched.

During the July-September quarter last year India saw a growth rate of 7.7 per cent. Growth for the fiscal year ending March 31 dropped to 6.7 per cent, its worst since 2003.