India has recorded its second fastest annual growth rate since gaining independence in 1947, expanding at a pace of 9.4 per cent.
The figures for the 12 months to March were revised up from the government%u2019s %u201Cadvance estimate%u201D of 9.2 per cent, issued in February, largely on account of sizeable upward adjustments to industrial growth in the first half of the year.
Even though inflation is now coming down, most economists believe that India%u2019s economy is continuing to grow well above its long-term sustainable rate. They predict further tightening of monetary policy and banking reserve ratios lies ahead.
Since January 2006 the Reserve Bank of India has raised its key overnight lending rate by 150 basis points to 7.75 per cent as part of efforts to check inflation, which eased to 5.27 per cent in the week ended May 12 after staying above 6 per cent between January and March.
India has grown faster than this only in one year since 1950-51, according to HSBC. In 1998-99, growth surged to 10.5 per cent before falling back in the early years of this decade.
In the past four years gross domestic product has grown at an average annual rate of 8.6 per cent, triggering a reappraisal of the country%u2019s potential as a force in the world economy.
The central bank has also increased banks%u2019 cash reserve requirements three times since December to slow down loan growth.
The credit reserve ratio, up 150 basis points in si
