Retail inflation eased in April and factory output hit a five-month low in March, raising the hopes for another interest rate cut on June 2 by RBI Governor Raghuram Rajan.

The latest two data points – released by the Statistics Ministry on Tuesday – has certainly increased the space for further monetary easing, say economy watchers.

Retail inflation as measured by consumer price index (CPI) cooled further in April 2015 to 4.87 per cent from revised level of 5.25 per cent in previous month.

The slide in CPI could be largely attributed to sharp fall in food inflation which came in at 5.11 per cent, much lower than the 6.14 per cent level in the previous month.

Food inflation has near 50 per cent weightage in the CPI, which is the price index now closely tracked by the RBI for its monetary policy actions.

IIP’s positive surprise Aided by better manufacturing performance and some base effect, the index of industrial production (IIP) came in at 2.1 per cent during March.

It had contracted 0.5 per cent in March last year.

Manufacturing – which has 75 per cent weightage in the IIP – grew 2.2 per cent in March 2015 as compared to contraction of 1.3 per cent in same month last fiscal.

Mining sector output grew 0.9 per cent (0.5 per cent).

For the full year 2014-15, IIP grew 2.8 per cent as against a contraction of 0.1 per cent in the previous year.

The other positive factor is that manufacturing for the entire year 2014-15 grew 2.3 per cent (-0.8 per cent).

Meanwhile, the IIP for February 2015 has been revised downwards to 4.88 per cent from 5 per cent earlier.

Industry view Federation of Indian Chambers of Commerce and Industry (FICCI) President Jyotsna Suri said that it was reassuring to see the positive growth in manufacturing for 2014-15.

However, the growth remains tepid. Critical constraints for the manufacturing sector like high interest rates, infrastructure bottlenecks, low domestic and export demand are an area of concerns for the sector and may continue to impact its growth in coming months.

“However, the overall business confidence has improved in the last few months and we are hopeful that steps taken by the government would yield benefits” she said.

Assocham Secretary-General DS Rawat said that the March 2015 IIP performance was encouraging. The government needs to keep on pushing for more reforms and improve implementation to realise the true potential of the manufacturing sector, he said.

Confederation of Indian Industry (CII) Director-General Chandrajit Banerjee said that industry – which has turned in a muted performance at the close of the financial year – is on a modest recovery path.

“Our hopes of growth revival are based on positive growth of capital goods sector,” he said.