According to data compiled by Joint Plant Committee (JPC), a Steel Ministry body, real consumption of the metal during the April-August period of the last fiscal was at 30.240 MT.
"Consumption was impacted by the slowdown in the domestic economy," JPC said.
Pulled down by a drop in mining and manufacturing output, India's economic growth in the April-June quarter slid to 4.4%, the lowest in past several years.
Global financial services firm Nomura had pegged the GDP growth at 4.2% for the current fiscal. Generally, steel consumption grows by 1.2 times of the GDP growth number.
Total production for sale, JPC said, grew by 4.9% during the April-August period of the current fiscal at 33.342 MT compared to 31.781 MT in the same period last financial year.
Imports were down by 28.2% to 2.410 MT from 3.357 MT a year earlier. At the same time, exports also dipped to 1.865 MT from 1.919 MT a year ago.
The balance between consumption and availability of steel thus stood at over 3.5 MT by the end of August.
Stating that accumulation of stocks by steel makers was a reflection of the poor economic condition, an analyst tracking the sector said poor demand from the construction and automobile sectors are primary reasons for stocks piling up.
"The trend of subdued demand witnessed in the domestic market due to sluggish economic growth, is likely to be over with Monsoon now coming to an end. Better demand is just a few days away," he said.
India's steel consumption grew by 3.3% during the 2012-13 fiscal to 73.336 MT while captains of the industry were hoping for a 6-7% growth during the current financial year.
Meanwhile, among major producers of steel in the country, state-run Steel Authority of India (SAIL) reported a 0.3% growth in production during the April-August period at 4.170 MT.
RINL reported 9.1% growth at 1.115 MT while Tata Steel's production was at 2.994 MT, a growth of 22.6% over the same period.
Compared to July 2013, production for sale of finished steel declined by six% in August 2013.