Indian economy grows faster than expected, sparks interest rate concerns

NEW DELHI, Nov 30, 2006 (AFP) – India’s economy grew a faster-than-expected 9.2 percent in the second quarter to September, official data showed Thursday, prompting concerns that overheating will require higher interest rates. The Indian rupee weakened Wednesday against the dollar to 44.74 from 44.65 after the data was announced, and strengthened against the euro to 58.9 from 58.96.

Finance Minister P. Chidambaram hailed the figures and said “the fact that the economy recorded the highest growth of 9.1 percent in the first half of any fiscal (year) since economic reforms began in 1991-92 makes us doubly happy.”

He cautioned that the rapid growth has stoked inflation but argued that the government would bring it under control through “supply side management” in an effort to avoid a hike in interest rates.

To that end, the government cut fuel costs Wednesday for gasoline (petrol) by just over four percent and diesel by slightly above three percent to reflect falling global oil prices, aiming to control rising prices for food hit by higher transport bills.

Wholesale price inflation, which has stayed above the government’s aim of around four percent and hit 5.29 percent in the second week of November, has led to exp