Analysts polled by Reuters had expected retail inflation to edge up to 3.60% last month from 3.36% in August.
Mining production showed a substantial jump of 9.4 percent in August from 4.8 percent in July.
The Reserve Bank of India (RBI) while keeping the policy rates unchanged in its latest monetary policy review last week, marginally increased the inflation outlook to 4.2-4.6% for the second half (October-March) of the financial year.
Food and beverages during the month under consideration recorded a rise of 1.76 per cent over the same month past year.
Both the Asian Development Bank as well as the Organisation for Economic Cooperation and Development (OECD) have also cut their growth projections for India to 7% and 6.7%, respectively, for fiscal 2017-18.
Fuel inflation stood at 5.56 percent in September, while housing inflation stood at 6.10 per cent. The cumulative growth for the period April-August 2017 over the corresponding period of the previous year stands at 2.2 percent.
Capital goods output, which is reflective of the private sector investment scenario, rose 5.4 percent in August compared with (-) 0.1 percent contraction in July. She added, "Encouragingly, the sequential improvement in industrial growth in August 2017 was broad-based, led by all three sectors (mining, manufacturing and electricity) and five of the six use-based industries (except infrastructure/construction goods)".
On a month-on-month basis, the CPI declined 0.15 percent and food prices fell 1.36 percent in September.
India's annual retail inflation remained static in September with a marginal drop in the food prices, official data showed on Thursday.