The decline in gross domestic product was blamed on slowing manufacturing and agriculture sectors, a report showed Friday.
Manufacturing in the latest quarter grew 0.8 percent, compared to 2.9 percent in the same period of the previous fiscal year. Agriculture grew 1.2 percent, compared to 3.1 percent in the same period the previous year.
Growth in the first six months of this fiscal year was 5.4 percent, down from 7.3 percent in the year-ago period.
The latest numbers were expected to add pressure on the Indian government to bring about reforms and increase demand for interest rate cuts, The Wall Street Journal reported.
C. Rangarajan, chairman of the Indian Prime Minister's Economic Advisory Council, was quoted as telling the CNBC TV18 channel that he expects growth to improve in the remaining two quarters of current fiscal year, which ends next March.
High inflation, government fiscal deficit and tight money affecting consumer demand have largely been responsible for the country's economic slowdown in the past 18 months, the Journal said.
"Sadly, India's reform needs are greater than its political system's capacity to deliver at the moment and policy implementation uncertainty remains a key risk," Jyoti Narasimhan, India economist at IHS Global Insight told the Journal. "It is unclear whether the fractious political system can yield substantial, meaningful reform."