India's economy grew by nine percent last year making it the world's fastest-growing major economy after China.  But the news is not all good. There are worries that high crude oil prices and runaway inflation will slow down growth. Anjana Pasricha has a report from New Delhi.

An onlooker gestures as he watches share prices on a screen on the facade of the building of the Bombay Stock Exchange (BSE) in Mumbai, India, 21 Jan 2008

India has pegged economic growth in the last fiscal year at a higher-than expected nine per cent. It is the third successive year that the economy has grown at this pace.

The numbers should have brought cheer to the government. But Indian officials are not celebrating as they battle two emerging concerns, high global crude oil prices and rising inflation. 

Record high crude oil prices are hurting India significantly because it imports about 70 percent of its needs.  

The government heavily subsidizes prices of petroleum products. But public sector oil companies are now reeling under losses, and have warned they could face a cash crunch if retail prices are not raised.

The government is likely to raise prices of gasoline soon, but there are concerns that the move will fuel inflation, which is already running high.

India's inflation rate surpassed eight percent last week, its highest level in four years.

Finance Minister P. Chidambaram says the government is trying to get a grip on prices. But he says there are no "easy solutions or instant answers."

"Nobody is drawing any great satisfaction with an inflation [rate] of 8.1 [percent]," said Chidambaram. Eight-point-one is worrisome inflation. But we are confident that we will gain mastery over the situation, and inflation will be contained over a period of time. Of course it depends on crude oil prices and commodity prices."

However, the finance minister expressed optimism that the economy will maintain a growth rate of 8.5 percent in the current year.

Economists say that may not be an easy task. There are already signs that the economy is slowing somewhat. Growth in the manufacturing sector came down substantially in the early part of the year, partly due to slowing demand from consumers being hurt by high prices.

Indeed, the year ahead could be challenging for India.  Economists say the government faces a daunting task in trying to maintain a high economic growth rate and keep inflation in check, which is hurting millions of poor people in the country.