However, the RBI also said a complete economic turnaround may still be distant and the positive signs seen were just early indicators given the delayed monsoons and persistence of the global economic recession.

'Lagged impact of the negative growth in manufacturing in the last quarter of 2008-09 on services demand, negative growth in capital goods, decline in the production of commercial vehicles, and an accelerated fall in import growth suggesting dampened demand conditions,' the RBI report added.

It also said food prices were likely to move northwards given the feeble progress of monsoons and rise in minimum support price paid to farmers for their crops.

Inflation could also move into higher territory, the central bank said.

'There are indications of inflation firming up by the end of the year due to the waning base effect of last year, increase in commodity prices, delayed progress of monsoon potentially driving up food prices,' it said.