New Delhi, Feb. 19 -- India's economy has recovered its lost momentum and consumption demand may improve on the back of moderating inflation and tax relief, the Reserve Bank of India said in its monthly bulletin.

The government's budget balances fiscal consolidation and growth objectives by focusing on capital expenditure alongside measures to support consumption, the RBI said.

While rural demand will be aided by robust agriculture sector performance, urban demand is poised to recover thanks to higher disposable incomes and income tax relief announced in the budget, according to the report.

On liquidity in the financial system, the central bank said it announced several measures including open market operations and variable rate repo a...