The growth has hit the lowest level in the last 81 months.
The growth rate of August factory output was lower than the 4.8 per cent achieved during the corresponding month of the previous fiscal.
"The Quick Estimates of Index of Industrial Production (IIP) with base 2011-12 for the month of August 2019 stands at 126.6, which is 1.1 per cent lower as compared to the level in the month of August 2018," the Ministry of Statistics and Programme Implementation said.
"The cumulative growth for the April-August period over the corresponding period of the previous year stands at 2.4 per cent," it added.
As per the data, the output rate of the manufacturing sector fell (-)1.2 per cent in August from a year-on-year (YoY) rise of 5.2 per cent.
On a YoY basis, mining production inched up by just 0.1 per cent from a negative growth of (-)0.6 per cent and the sub-index of electricity generation was lower by (-)0.9 per cent from 7.6 per cent.
Among the six use-based classification groups, the output of primary goods, which has the highest weightage of 34.04, grew by 1.1 per cent. The output of intermediate goods, which has the second highest weightage, increased by 7 per cent.
The output of consumer non-durables was up by 4.1 per cent, whereas that of consumer durables fell by (-)9.1 per cent.
In addition, output of infrastructure or construction goods decreased by (-)4.5 per cent and that of capital goods fell by (-)21 per cent.
In terms of industries, 15 out of the 23 industry groups in the manufacturing sector have shown negative growth during the month under review as compared to the corresponding month of the previous year.
"The industry group 'manufacture of motor vehicles, trailers and semi-trailers' has shown the highest negative growth of (-)23.1 per cent, followed by (-)21.7 per cent in 'manufacture of machinery and equipment n.e.c.' and (-)18 per cent in 'other manufacturing'," the ministry said.
"On the other hand, the industry group 'manufacture of basic metals' has shown the highest positive growth of 11.8 per cent, followed by 11.3 per cent in 'manufacture of wood and products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials' and 10.3 per cent in 'manufacture of wearing apparel'," it said.
According to Devendra Kumar Pant, Chief Economist at India Ratings & Research: "IIP growth has been the lowest in the last 81 months and saw the first contraction after June 2017. It appears that pre-stocking due to festive demand in September and October has not taken place."
"Going forward, the IIP is likely to show erratic low growth trend. The policy measures announced by the government after the first quarter GDP growth of 5 per cent are more supply side interventions and are unlikely to boost demand. With no fiscal space available to the government, it is unlikely that the demand is going to return back soon," Pant said.
ICRA's Principal Economist Aditi Nayar said: "With the worsening in the performance of Coal India Limited and electricity generation, and the continuing deep contraction in auto production in September 2019, it appears unlikely that the YoY decline in the IIP in August 2019 will be reversed in the just concluded month."
"There is a growing likelihood that the GDP growth may not meaningfully accelerate in Q2 FY2020 from the multi-quarter low of 5 per cent recorded in Q1 FY2020, despite a favourable base effect. The extent of pickup in consumption in the festive months and crop production in the rabi season will signal whether a material turnaround in demand and economic growth are in the offing."
Emkay Wealth Management's Research Head Joseph Thomas said: "If we look at the sub classification one can see that the shrinkage in output has come from a dismal performance in manufacturing, substantial fall in capital goods, consumer durables and infra. This amply reflects the underlying weakness in manufacturing and industrial activity which needs to be addressed without much loss of time for economic recovery."
( With inputs from IANS )