Indian govt consumption key to demand growth in economy-RBI report

Credit: REUTERS/Anushree Fadnavis

MUMBAI, Aug 25 (Reuters) - Indian government consumption will continue to support current economic demand while private consumption will likely lead the recovery when it takes hold after the COVID-19 outbreak eases, the Reserve Bank of India (RBI) said in its annual report on Tuesday.

"The upticks that became visible in May and June after the lockdown was eased in several parts of the country, appear to have lost strength in July and August, mainly due to reimposition or stricter imposition of lockdowns, suggesting that contraction in economic activity will likely prolong into Q2," the RBI said.

More protracted spread of the coronavirus pandemic, deviations of the monsoon from the predicted normal rains and global financial market volatility are key downside risks to growth, the central bank said.

(Reporting by Swati Bhat, Nupur Anand, Manoj Kumar and Chris Thomas; Editing by Christian Schmollinger)

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