Industrial growth slowed down to 5.6 per cent in August from 10.6 per cent in the corresponding period last year, on the back of a 2.6 per cent contraction in the capital goods production.
Among the main industry segments, manufacturing activity declined to 5.9 per cent from 10.6 per cent a year ago.
Mining sector growth was at 7 per cent as compared to 11 per cent in August last year.
Electricity generation growth, too, slowed down to one per cent from 10.6 per cent in August last year.
Capital goods sector contracted by 2.6 per cent in August, in comparison to 9.2 per cent growth in the year-ago period, official data released here said.
Also, consumer non-durables, which are mainly fast moving consumer goods, recorded a negative growth of 1.2 per cent, in comparison to an expansion of 6.1 per cent in the same month last year.
Consumer durables was the only segment of goods, which saw an output growth over the year-ago period.
In August consumer durables expanded by 26.5 per cent, as compared to 24.7 per cent in the year-ago period.
Of the 17 industry groups, as many as 14 have shown positive growth during the month of August.
The industrial expansion figure for July was revised upwards to 15.2 per cent from the earlier estimates of 13.8 per cent. Industrial growth for the first five months of this fiscal stood at 10.6 per cent in comparison to 5.9 per cent growth in the same period a year ago.
Experts had projected that the industry growth might slip to single-digit level because of the high base effect of last year. Moderate growth in core sectors, which accounts for 26.7 per cent of the total industrial output, was also seen pulling down growth in factory output in August, experts said.
The core sector, which includes crude oil, petroleum refinery products, coal, electricity, cement and finished steel, grew by 3.7 per cent in August.
The growth had slowed from 3.9 per cent recorded in July.
'Hike in policy rates will hurt recovery': Expressing concerns over deceleration in industrial output for August, India Inc today demanded
". . . the RBI should not raise policy rates any further as it could have a negative impact on consumer demand as well as corporate investment and thereby slow down in economic growth," Confederation of Indian Industry said. Industrial production growth rate nearly halved to 5.6 per cent in August from a year ago. RBI has hiked key short-term lending and borrowing (reverse repo) rates five times this year.
At present, the repo and reverse repo rates are at 6 per cent and 5 per cent, respectively.
The apex bank is scheduled to announce its mid-term policy review on 2 November. Federation of Indian Chambers of Commerce and Industry too said any further hike in interest rates could impact consumer durables and automotive sector.
"Negative growth in key sectors like capital goods, apparels ... is indeed a cause of concern and with appreciation in rupee and hardening of interest rates, the growth of manufacturing sector may be significantly affected," Ficci secretary general Amit Mitra said.
Manufacturing, which constitutes 80 per cent of the industrial ouptput, grew by 5.9 per cent in August 2010, against 10.6 in the same month last year.
Assocham president Swati Piramal expressed apprehensions over the nature of industrial recovery that the country has been witnessing.
"The implications of falling industrial production will pull down the services sector as most of its products are intermediate in nature and the combined effect on employment poses a grave concern to the economy," she said.
Indian economy grew by 8.8 per cent in the first quarter of this fiscal, giving hopes that the gross domestic product growth would revert to high expansion mode, after two successive years of slowdown due to the global financial meltdown.
