In signs that the Indian economy is not out of the woods yet, factory output growth slowed to 0.6% in August after expanding 2.8% in July and 2% a year ago, government data released on Friday showed.
The IIP figure for July was revised upward at 2.8% from 2.6%.
A contraction in manufacturing, which constitutes 76% of the index, and capital goods, a barometre for investment activity, led to the fall.
The manufacturing sector contracted 0.1% in August against an expansion of 3% in July and 2.4% in the year-ago period.
Capital goods output declined 2% in August compared to a growth of 15.6% in July and a contraction of 4.4% in the same month of the previous fiscal year.
The mining sector, with a weight of about 14% in the IIP, showed a contraction of 0.2% in August while power generation showed a healthy growth of 7.2% in the month under review.
“The IIP growth for August was disappointing and also the growth in export-oriented sectors slowed down, notably apparel and leather... the only good news is that investments in new projects are showing signs of improvement,” said Soumya Kanti Ghosh, chief economic adviser, State Bank of India.
“Markets were largely factoring in better numbers owing to the core output data and export growth,” said Bhupali Gursale, economist at Angel Broking.