I know that spoons and forks are not generally used for normal Indian food and that I should not be ashamed of the fact that my daughter likes to eat rice from her hands. But is that okay in good restaurants? What i am worried about is anyone judging her manners by the fact that she is eating rice with her hands. Is it considered bad manners to eat rice with your hands? Or should I ask her to at least use a spoon when eating rice outside of our home?
Eating with your hands is not a bad thing, not necessarily. Ofcourse, if you're out in a fancy restaurant, etiquette must be followed. Teach your daughter to eat with cutlery when you are dining outside, otherwise let her continue using her hands at home.
Eating with your hands is an age-old Indian tradition - be proud of it! Unless you are at a highly formal get-together, don't let it bother you. Your daughter will learn as she grows older, and will adapt to different situations.
I agree with Sushant. Eating with hands is nothing to be ashamed about - just ensure that your daughter is not very messy! Remember, when you eat with your hands, it is important to take small bites. This usually helps in avoiding any mess/spilling of food.
In India, this custom is not frowned upon. But if you are travelling abroad, keep in mind that not everyone will automatically understand your custom and accept it. Judge your surroundings, and teach your daughter to do the same. Also, at the same time, hygiene must not be compromised while eating with your hands - make sure your daughter washes her hands thoroughly!
In my personal opinion, eating with hands is a tradition that must be limited to your home. It is unsightly and often messy, and doing so in a public space might attract extra attention. It is best to stick to the norms and behave like everyone around you.
But, then again, this is just my opinion. Its your call eventually, since its your family.
Best of luck!