New Delhi: Showing signs of recovery, industrial production gathered pace and grew 6.8 percent in January, over the previous month, mainly due to improvement in the manufacturing sector.

Growth in factory output growth, as measured by the Index of Industrial Production (IIP), was however higher at 7.5 percent in January 2011.

IIP growth has been revised upwards to 2.5 percent in December, from the provisional estimates of 1.8 percent.

Output of the manufacturing sector, which constitutes over 75 percent of the index, rose 8.5 percent in January, compared to 8.1 percent in the same month last year, according to the official data released today.

Besides, output of consumer goods grew 20.2 percent in January, as compared to 8.3 percent in the same month last year. The production of the non-durable consumer goods segment has shown signs of improvement and grew by 42.1 percent in the month under review.

However the capital goods sector witnessed a contraction of 1.5 percent, as against a growth of 5.3 percent in the same month last year.

Mining output too contracted by 2.7 percent in January, against 1.7 percent growth in the year ago period.

The power generation witnessed a slow growth of 3.2 percent in January, compared to 10.5 percent in the year ago period.

During the month, 13 out of 22 industry groups witnessed growth. Output of basic goods went up by meagre 1.6 percent, as against 7.7 percent in the year ago period. However, intermediate goods witnessed a contraction of 3.2 percent, as against 7.4 percent growth in January last year.

During the April-January period this fiscal, the IIP growth stood at 4 percent, as against 8.3 percent in same period in 2010-11.

Earlier last month, the Central Statistical Organisation (CSO) had estimated that the Indian economy would grow at a slower pace of 6.9 percent this fiscal, as against 8.4 percent in 2010-11.

The overall slow growth of IIP at 4 percent during the April-January period, may prompt the Reserve Bank to cut short term lending and borrowing rates in the mid-quarterly review of the monetary policy on Wednesday, especially in view of easing inflation, experts said.

Industry officials have blamed the slowdown in growth to the high interest rate regime that has made borrowings costly and curbed consumer spending.

The Prime Minister's economic advisory panel chief C Rangarajan has said that the policy rate cuts by RBI would depend on inflation movement.

Overall inflation has started showing sign of cooling off as cheaper food items pulled it down to a 26-month low of 6.55 percent in January.

The apex bank in a surprise move had slashed Cash Reserve Ratio (CRR) from 5.5 percent to 4.75 percent on Friday, to infuse Rs 48,000 crore to ease the liquidity crunch in the financial system.

RBI had last reduced CRR by 0.5 percentage point on January 24 as well, injecting Rs 32,000 crore into the system.