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 expectations of an interest rate increase by the Reserve Bank of India (RBI) in its next policy review in January.

"This trend may sustain for a quarter ahead. Looking at this strong growth, the RBI may have to tighten interest rates in the coming quarters," said Nikhil Thacker, head of research with brokerage UTI Securities.

The faster growth and the prospect of higher interest rates helped the Mumbai stock exchange where the benchmark Sensex index closed up 79.58 points or 0.58 percent to 13,696.31 trade as analysts considered raising full-year growth forecasts.

India's roughly 780 billion dollar economy has now posted growth rates above eight percent for nearly the past two years, placing it second to China among the major economies. China's two trillion dollar economy expanded 10.4 percent in the quarter ended September.

The gains were led by services, including real estate and communications, which grew 13.9 percent, followed by manufacturing at 11.9 percent year-on-year.

Experts had expected fiscal second-quarter growth figures ranging from 8.0 to 8.7 percent after the economy picked up speed to 8.9 percent in the three months to June.

"These GDP numbers beat expectations, led by strong manufacturing and services growth," said Rajeev Malik, economist with J P Morgan Chase in Singapore.