Industrial production in India rose 2.7 per cent in August, more than expected on a rebound in mining activity, though investment still appears weak.

Markets took the news in stride yesterday, suggesting that investors believe the numbers will do little to convince the central bank to cut interest rates when it meets later this month.

Mining output rose 2 per cent, a bounce for the troubled sector, which posted a 5.5 per cent contraction a year earlier. Manufacturing rose 2.9 per cent and electricity output increased 1.9 per cent from the year before.

Production of capital goods - a sign of investment in physical assets such as machinery - slid 1.7 per cent. A CNBC-TV-18 poll had forecast a rise of around 1 per cent in industrial production.

New Delhi has been scrambling to enact investor friendly measures to kick start growth and improve sentiment in Asia's third-largest economy.

Much also still needs to be done to clean up India's power sector, with many state utilities facing bankruptcy. India's mining sector has been hobbled by scandal, fights over land and bureaucratic bottlenecks.

The central bank has made clear that inflation remains its primary concern, despite economic growth slowing to levels not seen since 2009, when India was struggling with the impact of the Great Recession.

The World Bank and the International Monetary Fund earlier this week cut their predictions for India's economic growth. The World Bank expects India's economy to grow 6 per cent for the year, and the International Monetary Fund forecasts growth of just 4.9 per cent, down from its earlier projection of 6.1 per cent.

The government also revised its July industrial production data, saying output contracted 0.2 per cent, down from its earlier estimate of 0.1 per cent growth.

August's uptick was the biggest rise in industrial output since February, according to FactSet.-Reuters