The slowdown to year-on-year growth of 7.1 percent in June comes after eight months of double-digit expansion - a pace that was unsustainable.

The moderation is in large part attributable to the high levels of industrial production at the same last year when growth was rebounding from the global recession, economists say.

Manufacturing, which has the greatest weight in the index, grew 7.3 percent during the month. Capital goods output grew 9.7 percent, but consumer durables production remained strong, growing 27.4 percent over last year.

The government revised down May industrial output growth to 11.3 percent from 11.5 percent.

"Would I be worried?" said Shubhada Rao, chief economist for Yes Bank. "Not really. Momentum is good. Global demand is going to be soft so the support of exports may remain muted, but the focus entirely has shifted to domestic demand. With a good monsoon, we expect rural and overall demand to remain strong." Credit growth has been rising, advance indicators of purchasing are positive and bank credit is improving, she said.

Strong growth this time last year - during the second half, industrial output growth averaged 14.3 percent - is likely to keep headline numbers muted for some months yet, she said.

She expects industrial production growth to come in at 9.0 to 9.5 percent for the fiscal year through March 2011, higher than India's five-year average of 8.5 percent.

Economies across Asia are also facing headwinds as governments pull back post-crisis stimulus spending while demand for exports from Europe and the Asia remains subdued. India, however, is less reliant than exports for growth than many other Asian economies.

The country's faster-than-expected industrial rebound was fueled in part by government stimulus measures, which are now being unwound. Inflation worries have pushed the central bank to hike interest rates four times this year.

The government has raised some taxes, but it continues to spend. Last week, the government asked Parliament to approve an additional Rs.545.9 billion ($11.6 billion) in spending to combat a Maoist insurgency in eastern India and to pay for the Commonwealth Games being held in New Delhi in October, oil subsidies and other outlays.

China's industrial output in July slowed for a fifth month to 13.4 percent over a year earlier, its lowest level this year.