Factory output measured in terms of Index of Industrial Production (IIP) also declined by 3.4 percent in November and 1.2 percent in December according to data released by Central Statistics Office (CSO).

The index had registered a growth of 2.8 percent in January 2015, it said.

Concerned over sluggish recovery, the India Inc stepped up its demand for rate cut by the RBI at monetary policy for next fiscal to be announced on April 5.

The decline in January has been primarily on account of a massive drop in output of capital goods which showed a contraction of 20.4 percent in January compared to growth of 12.4 percent in the same month a year ago.

The manufacturing sector, which accounts for over 75 percent of the index, declined by 2.8 percent against a growth of 3.4 percent in January 2015.

However, the mining sector showed an improvement, registering a growth of 1.2 percent in the month as against a contraction of 1.8 percent in same month a year ago.

Power generation showed acceleration, recording a growth of 6.6 percent as against 3.3 percent growth in same month a year ago.

The consumer goods output remained stagnant as against 1.9 percent contraction in January last fiscal.

In terms of industries, ten out of 22 industry groups in the manufacturing sector showed negative growth during January 2016 as compared to corresponding month of the previous year.

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