New Delhi, Sep 12 (IANS): Dampened by a sharp fall in capital goods production, India's factory output grew at a sluggish 3.3 percent in July compared to a year earlier, much slower than expectations and sharply below the 8.8 percent growth registered in the previous month.

According to data released Monday by the ministry of statistics and programme implementation, capital goods production fell sharply by 15.2 percent in the month.

The index of industrial production (IIP) had grown at a robust 9.9 percent in July 2010.

Manufacturing, which has a majority share in the index, grew at a slow 2.3 percent in the month under review, while that the mining sector saw output rise by 2.8 percent.

Electricity generation, however, rose a robust 13.1 percent in July.

The fall in industrial output will lend further strength to the arguments of India Inc that continuous rate hikes by the Reserve Bank of India were affecting growth.

The RBI has raised key interest rates 11 times since January 2010 to tame inflation.

Although, headline inflation still remains stubbornly close to double digits and food inflation last recorded for the week ended Aug 27 was at 9.55 percent.

With the RBI meeting this week to review the monetary policy, all eyes will be on the central bank if it pays heed to the sluggishness in factory output.