The factory output number has remained in positive territory for second month in a row mainly due to a better show by manufacturing, mining and power sectors and higher output of capital goods.
The output, as measured by the Index of Industrial Production (IIP), had contracted by 2.5 percent in May last year.
IIP data for April remained unchanged at 3.4 percent after revision of the provisional estimates released last month, according to the information released by the Central Statistics Office (CSO).
The IIP's previous high was recorded in October 2012 at 8.4 percent.
"The rise in industrial production provides a glimmer of hope that the economy could be bottoming out and recovery could be on the anvil," CII Director General Chandrajit Banerjee said.
During the April-May period of the current fiscal, IIP has recorded a growth of 4 percent, as against the contraction of 0.5 percent in the first two months of the 2013-14 fiscal.
Manufacturing, which constitutes over 75 percent of the index, grew 4.8 percent in May, compared to decline in output by 3.2 percent a year ago. For April-May, the sector has recorded 3.7 percent growth, compared to the contraction of 0.7 percent in the year-ago period.
Production of capital goods, a barometer of demand, grew by 4.5 percent in May in sharp contrast to 3.7 percent contraction in same month of last fiscal.
Overall, 16 of the 22 industry groups in manufacturing showed positive growth in May.
According to the IIP data, in April-May, the capital goods output has grown by 9.3 percent, compared to the contraction of 2.1 percent in the first two months of 2013-14.
The mining sector grew by 2.7 percent in May as against a dip of 5.9 per a year ago. For April-May, the segment grew by 2.6 percent, compared to decline in production by 4.7 percent in the year-ago period.
Power generation increased by 6.3 percent in May as compared to 6.2 percent growth in the same month of 2013. In April-May, power output grew by 9 percent compared to a growth of 5.3 percent in the year-ago period.
Commenting on IIP, Ficci President Sidharth Birla said: "While it is reassuring to see some pick up in the growth of manufacturing in May but it needs to be seen in the context of negative base. The encouraging sign is the broad based growth as sixteen out of twenty two sectors have shown positive growth in manufacturing."
The output of consumer goods grew by 3.7 percent in May compared to the contraction of 6.6 percent a year ago. However, in April-May, the segment showed a contraction of 0.7 percent compared to a decline of 2.5 percent the same period of 2013-14.
The consumer durables segment grew by 3.2 percent in May as against a decline of 18.3 percent previously. For April- May, it declined by 2.5 percent as against a contraction of 14 percent in the first two months of last fiscal.
Production of consumer non-durables also grew by 3.9 percent, compared with a growth of 3.8 percent in May last year. For April-May, the segment has grown by 0.5 percent, compared to a growth of 7.6 percent a year ago.
Output of intermediate goods expanded 2.7 percent in May, compared to 1.1 percent a year ago. For April-May the output has grown by 3 percent, compared to 1.8 percent in the first two months of last fiscal.
Basic goods output grew 6.3 percent in May, against a dip of 0.3 percent a year ago. For April-May, the segment has grown by 6.8 percent, compared to a growth 0.5 percent in the same period of 2013-14.