The Nikkei purchasing managers' index (PMI) data showed that India's factory production expanded at a slower pace in August compared to July, in line with Monday's GDP numbers which showed a slower growth for the manufacturing sector in the first quarter compared to the previous quarter,
However, falling global commodity prices abated inflationary concerns, raising hopes of rate cuts by the Reserve Bank of India this month.
The PMI fell to 52.3 points in August against six-month high of 52.7 in July. But barring July, the reading in August is still the highest in six months.
A PMI score above 50 points means expansion and below 50 shows contraction. The manufacturing sector has been expanding after October, 2013.
Markit Economics, which compiles PMI data, says the number reflected weaker improvement in the health of the sector, attributing it to softer increase in output, orders and stock of purchases.
The consumer goods sector outperformed the capital and intermediate levels in terms of output, orders and buying levels.