India's industrial output as measured by the index of industrial production (IIP) grew 2.4% in May after contracting 0.9% in the previous month, thanks to a surge in manufacturing and electricity production, though a 7.7% fall in capital goods output during the month is likely to be a cause of concern for policymakers.
However, on a year-on-year basis, it fell to 2.4% in May 2012 from 6.2% a year ago. The decline is likely to put pressure on the RBI to cut lending rates at its quarterly policy review on July 31.
The cumulative growth in factory output during April-May stood at 0.8%.
"The IIP numbers remain weak but are better than previous month," said Montek Singh Ahluwalia, deputy chairman, Planning Commission. "Such growth rates are not acceptable."
"The negative growth in capital goods sector indicates that the investment momentum has dried up," said Chandrajit Banerjee, director-general, CII.