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India's economy grew at an annual rate of 7.4% between July and September, official figures show, picking up from the 7% rate of growth in the previous quarter.

Higher domestic demand and manufacturing activity fuelled the pace, taking the rate of growth above that of China.

India's central bank is meeting to set the level of interest rates on Tuesday.

Last month it cut rates by half a percentage point to 6.75%.

India's economy has benefitted from a fall in commodity prices, which have made imports of heavily bought-in goods such as fuel and gold less expensive.

India's growth has recently been outpacing China, which is growing at a rate of 6.9% according to the latest figures.

But although headline growth appears buoyant in India, the way the statistics are compiled has changed recently, making comparisons difficult.

In parts of the country a drought has damaged agricultural output and farm wages for the second year running.

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Analysis: Yogita Limaye, BBC News Mumbai

The numbers released today come as good news for India's government, which has been facing criticism for not delivering on their promise of economic reform so far, and has politically been on the back foot after a heavy defeat in a recent state election.

The data shows India continues to be the fastest growing major economy in the world. But while growth of more than 7% would be a dream for most countries, India needs to grow even faster if it is to create jobs for its large population.

For that, it needs big investments. And for those to come, the country needs to create a business friendly environment.

This week will be an important test for the government as it hopes to push a key tax bill through parliament, which will cut the multiple layers of taxation business owners here face, and introduce one single tax across the country.

If passed, it will be a landmark moment and will be the first major reform by Prime Minister Narendra Modi's government since it came to power in 2014.