Analysts polled by Reuters had expected an annual output growth of 3.5 per cent for the month.
Capital goods production, a barometer for investments in the economy, contracted by 2 per cent in August.
It hopes to attract billions of dollars in investment by this move, and may ease some restrictions on foreign inflows.
Mayaram also said as of now, a shutdown of the US government is not likely to have a major impact on the Indian economy.
Arvind Mayaram, economic affairs secretary at the finance ministry, also said that a fall in bulk diesel demand this fiscal year will save the government about $1 billion.
Foreign direct investment inflows into India rose an annual 12.9 percent in July to $1.66 billion.
Investor confidence has evaporated amid fears over the rising cost of funding India's gaping current account deficit, prompting New Delhi to delay plans to raise much-needed funds through partial privatisations, finance ministry sources said.
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Chidambaram, speaking to reporters, also said the fundamentals of the Indian economy had not changed and asked investors to wait for the April-June quarter growth numbers due at the end of the month.
Net tax receipts for the first three months of 2013 touched Rs 1.02 trillion.
Government sources say India could consider raising the policy repo rate if the rupee falls towards 61-62 to the dollar.
The bank is due to review the monetary policy on July 30.
Media has raised the issues that new pricing to benefit Reliance Industries.
India's gold imports could pick up in the next few months after slumping 81 percent in June as falling prices spur buying, a government source said, adding to New Delhi's anxiety over a record-low rupee and a wide current account deficit.
India sharpened measures to curb imports of the yellow metal by hiking the import duty and restricting consignment imports, after shipments jumped to more than 300 tonnes in April and May.
The rupee fell to an all-time low of 61.21 on Monday, sparking speculation about potential measures from the Reserve Bank of India, including providing a special window for oil companies to buy dollars.
The Reserve Bank of India has cut repo rates, the rate at which it lends money to banks, by 75 basis points since January this year, but most banks have not lowered lending rates.
It may widen because of money outflows.
India's current account deficit hit a record high 4.8 per cent of gross domestic product in the fiscal year that ended in March
Rupee, he said, is not in shambles and "we should not be overtly pessimistic".
India has been struggling to control the current account deficit that hit an all-time high of 6.7 percent of GDP in the December quarter.
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