Growth in factory output, as measured by the index of industrial production (IIP), during the April-July period contracted by 0.1 per cent, official data said.
However, on sequential basis July's growth at 0.1 per cent is an improvement over (-) 1.8 per cent recorded in June.
The worst performer has been the manufacturing sector, which constitutes over 75 per cent of the index, showing a decline of 0.7 per cent in July, and 0.9 per cent in the April-July period.
Concerned over the performance of the manufacturing sector, industry chamber Ficci urged the "RBI to cut down interest rates further at least by another 50 basis points immediately".
Among the different industrial segments, production of capital goods, which refers to the equipment used by industry to produce consumer items, declined by 5 per cent. During the April-July period, the output of the sector contracted by 16.8 per cent.
"The economy is in need of sentiment boosters. Investments have dried up... It is imperative that non- legislative policy measures are announced at the earliest, which could help improve confidence levels in the economy," industry chamber CII said.
The Reserve Bank is scheduled to announce its mid-quarterly review of monetary policy on Monday which might contain some steps to boost growth. Finance Minister P Chidambaram, who met heads of PSUs today, has already indicated that steps would be taken to boost investment.