The RBI has given a guidance of 5.7 per cent GDP growth this fiscal year, which is way below the government target of over 6 per cent.
With a majority of the key drivers facing resistance, the recovery will come largely on account of the monsoons.
"Leading indicators do not suggest immediate improvement in production activity and a slow paced recovery is likely to shape only later in FY14, supported by good monsoon that could shore up rural demand," the RBI said in its macro-economic and monetary developments report released on the eve of the policy announcement.
Indicators like a stagnation in the IIP growth in April and May at 0.1 per cent point to the fact that the recovery is yet to take shape. Moreover, the deceleration in the services sector, which contributes over 60 per cent to GDP, has also added to worries on the growth front, the report said.
"Revival will not materialise until stable policy and regulatory regimes supportive of industrial activity are firmly in place and the envisaged plans to reomve structural bottlenecks aare quickly and fully implemented," it said.
Stating that the Southwest monsoons arrived on time and is forecasted to be normal, the report said farm growth is expected to pick up this year.
Accordingly, the RBI's professional forecasters have pegged farm growth at 3 per cent this fiscal year, up from 1.9 per cent in FY13.
It said as many as 29 of the 36 sub-divisions have received excess or normal rainfall as of July 24, as against 14 at the same time last year. However, it added six sub-divisions including the grain bowl of Haryana and Chandigarh have received deficient rainfall so far.