New Delhi, Oct. 10: Industry growth was at a 10-year low of 1.3 per cent in August compared with 10.9 per cent a year ago, hobbled by high interest rates which reduced lending to companies putting up projects.

However, finance minister P. Chidambaram as well as economists said the index of industrial production (IIP) was “not very reliable”.

Analysts said the industrial slowdown would continue for some time, but the easing of the inflation rate to 11.8 per cent for the week ended September 27 and the continuous fall in global crude oil prices could have a favourable impact on the economy in the medium term.

D.K. Joshi, principal economist with rating agency Crisil, said it was surprising that industrial production dipped so low, while exports grew at a decent rate of 27 per cent in August. “We could see some rebound in industrial production next month.”

In IIP data for August, manufacturing grew by a mere 1.1 per cent against 10.7 per cent a year ago.

Besides manufacturing, IIP growth was affected by power, which recorded an abysmally low 0.8 per cent growth compared with 9.2 per cent a year ago.

Growth in mining fell to 4 per cent from 14.7 per cent last year.

Growth in key infrastructure industries plunged to 2.3 per cent from 9.5 per cent a year ago, with crude oil and refining faring poorly.

“We were expecting a slowdown in industrial production because of a weak demand, but these numbers have come as a big surprise,” said N.R. Bhanumurthy of the Institute of Economic Growth.

Growth has decelerated the most in capital goods which grew 2.3 per cent compared with 30.8 per cent a year ago. In July, it grew 20 per cent.

Finance minister P. Chidambaram said he had conveyed his concerns on IIP statistics to the industry ministry.

However, Pronab Sen, chief statistician of India, said the IIP data was as reliable as it was years ago within its limitations.