Meanwhile, growth in the key infrastructure sector slowed to 1.6 per cent in January from 8.3 per cent in the same month a year ago due to poor output of coal, petroleum refinery products and natural gas, adding to the concerns of industry.
Worried over 1.9 per cent contraction in the output of the manufacturing sector, India Inc stepped up its demand for a rate cut by the Reserve Bank of India (RBI) to boost demand and spur growth.
The manufacturing sector had grown 2.5 per cent a year ago, according to official data released here by the Central Statistics Office (CSO).
The manufacturing output contracted 0.7 per cent for the first nine months of the financial year.
The country's gross domestic product (GDP) had expanded 4.8 per cent in the July-September quarter and 4.4 per cent in April-June.
Growth in the first nine months (April-December) was 4.6 per cent.
The economy must expand by 5.7 per cent in January- March to achieve estimated GDP expansion of 4.9 per cent in 2013-14.
Prime Minister's Economic Advisory Council Chairman C Rangarajan hoped that growth would be strong enough in the fourth quarter to achieve 4.9 per cent mark. He termed the third quarter performance as "a little below expectation".
Expressing concerns over sub-optimal output in mining and manufacturing sectors, CII Director General Chandrajit Banerjee suggested that with inflation on the wane RBI should now ease monetary policy.
On industry's demand for a rate cut, Rangarajan said: "That would depend on inflation numbers, if inflation continues to trend downwards, it will give room for RBI to cut rates."
FICCI President Sidharth Birla said that the GDP growth for the third quarter "disappoints and adds to the concerns on achieving full year target of 4.9 per cent as brought out by CSO earlier.
These numbers indicate that the slowdown is entrenched in the economy...this prolonged slowdown in growth will have serious implications for employment generation and unless the trajectory is reversed soon we could face grave social challenges."
The farm sector output expanded 3.6 per cent in the period under review compared with 0.8 per cent in the corresponding period of the previous financial year.
The services sector expanded 12.5 per cent in the October-December quarter as against 10.2 per cent a year earlier.
The segment grew 10.5 per cent in April-December compared with 10.8 per cent in the same period a year ago.
Mining and quarrying contracted 1.6 per cent as against a decline of 2 per cent in the same period of the previous financial year.
During April-December, the sector's output contracted 1.6 per cent compared to a 1.1 per cent dip in production in the same period a year ago.
The community, social and personal services segment grew 7 per cent as compared to 4 per cent earlier. During the nine-month period, the segment grew 6.7 per cent.
Gross Fixed Capital Formation, an indicator of fresh investments, at constant (2004-05) prices remained flat at Rs 5 lakh crore in the third quarter compared with the same period of the previous financial year.
Growth in the trade, hotels, transport and communications segment slowed to 4.3 per cent in the third quarter from 5.9 per cent in the same period last year. In the first nine months, it grew 4.1 per cent.