India's inflation rate surges to 11.89 percent, industry growth declines to 6-year low of 3.8 percent

Further hike in key rates will make borrowing more difficult and may lead to decline in business investment, resulting in economic slowdown.

The latest industrial growth data or Index of Industrial Production (IIP) showed that India's industrial output declined to a 6-year low of 3.8 percent in May 2008, lower than 10.6 percent posted for the corresponding period last year. In April 2008, it grew by 7 percent.

Production of manufacturing goods, which has a weight of over 79 percent in IIP, showed a growth decline, posting 3.9 percent growth in May, compared to 11.3 percent a year earlier.

Capital goods output growth slowed to 2.5 percent in May, compared to 22.4 percent a year earlier.

Electricity production growth rate slipped to 2 percent in May from 9 percent a year earlier.

However, mining industries showed a positive growth of 5.2 percent in May, up from 3.8 percent a year earlier.