The Nikkei India Manufacturing Purchasing Managers' Index, compiled by Markit, fell to 52.3 in August from July's 52.7, showing a slowing in pace of manufacturing.
A reading above 50 indicates expansion.
The slowing of growth clearly indicates what many observers have been saying on things not moving as fast as anticipated and the need for desperate reforms. It also raises pressure on the Reserve Bank of India to cut interest rates after GDP for the first quarter ending June 30, 2015 also slowed.
Although manufacturing business conditions continued to improve in August, latest data pointed to weaker rates of expansion for both output and new orders, a Markit release has stated.
On the price front, input costs decreased for the first time in six months and, subsequently, firms lowered their selling prices.
Elsewhere, post-production inventories contracted at the sharpest pace since data were first collected in April 2005.