A slew of data released on Monday sent out worrying signals about the economy — with industrial production dipping in July, and the tempo of tax collections up to August sliding — but the easing of retail inflation to 5.05 per cent raised hopes of a growth-boosting interest rate cut by the Reserve Bank of India.

Index of Industrial Production dipped by 2.4 per cent in July against a growth of 1.95 in June 2016. Shrinking manufacturing output and poor appetite for capital goods accounted for the IIP’s worst performance in eight months. The index had previously reached its lowest level in November last year, when it dipped by 3.4 per cent.

But consumer price inflation eased to 5.05 in August from 6.07 in July on the back of good monsoon rains; food price inflation also softened to 5.91 per cent in August from 8.35 per cent a month earlier.

Finance Ministry officials saw this as a cue for a rate cut. “Inflation rate and policy rate are usually linked. When inflation comes down, it’s for the RBI to take the call,” said Economic Affairs Secretary Shaktikanta Das.

“The chance of another rate cut has increased and may to happen by the end of the year,” said Rishi Shah, Economist, Deloitte.

Manufacturing shock Manufacturing output, which constitutes 75 per cent of the IIP, fell the sharpest, by 3.4 per cent, against 0.7 per cent growth in June.

“Twelve out of the 22 industry groups in the manufacturing sector have shown negative growth in July, 2016,” said an official release. The mining sector posted a growth of 0.8 per cent while electricity sector expanded by 1.6 per cent.

Taxing troubles Data points related to two crucial Central taxes — direct and indirect — released on Monday presented a mixed picture of the economy.

Achieving Budget targets for the current fiscal will be a big ask going by the collection trends so far and much would depend on sustaining current economic growth, say economy watchers. Net indirect tax revenues grew 27.5 per cent upto August this fiscal, and net direct tax collections grew 15.03 per cent during April-August 2016, official data showed.

But the tempo of tax collection collection of both direct and indirect taxes upto July were rather more robust. Till August 2016, the Centre has achieved 22.30 per cent of the Budget estimate on the direct tax side. On the indirect tax side, it was more comfortably placed at 43.2 per cent.

Both excise duty and service tax continued to show healthy growth rates of 48.8 per cent and 23.2 per cent, respectively. However, Customs duty collections recorded a growth of just 5.7 per cent.

Gross corporate tax collections grew 11.55 per cent, and personal IT (including securities transaction tax) grew 24.06 per cent. But after adjusting for refunds, corporate tax collections contracted 1.89 per cent.

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