GDP Grows 8.8% for April to June Quarter

India's economy grew at its fastest clip in nearly three years in the quarter through June on strong manufacturing growth and farm output that may keep the Reserve Bank on its policy tightening path.

The 8.8% expansion compares with a median forecast of an annual rise of 8.7% in a Reuters' poll and an 8.6% expansion in the previous quarter. While a CNBC-TV18 poll had seen gross domestic product (GDP) growth at 8.9%.

The data underscores continued growth momentum in Asia's third-largest economy amid growing uncertainty over global recovery. The strong growth may allow the Reserve Bank of India (RBI) to focus more on containing near double-digit inflation.

India's domestic-demand driven economy is benefiting from a buoyant consumer demand that is pushing up car sales and making factories produce to their optimum capacity.

*Annual car sales in India rose 38% in July.

*June quarter manufacturing output jumped 12.4% on year compared with an annual rise of 3.4% in the year ago period.

*Its farm sector expanded 2.8% and is expected to see robust growth on good monsoon rains, which is likely to further boost consumer demand by lifting rural income.

The economy is expected to grow 8.5% in the current fiscal year to end-March 2011, after expanding an annual 7.4% in the previous year. But, a strong economic growth has also raised the spectre of capacity constraints, which analysts hold partly responsible for a persistently high headline inflation, which stood at 9.97% last month.

Although India's wholesale price index in July rose at its slowest pace in six months, underlying price pressures remain.