It also said that the government's immediate decision to ban high-end notes could "continue to disrupt business and household economic activities."
The World Bank has also said that it expects the demonetisation to have an impact on the next quarter as well. "Weak industrial production and manufacturing and services purchasing managers' indexes (PMI), further suggest a setback to activity in the fourth quarter of FY2017," the report said.
It also said that demonetisation could pose a risk to other important reforms such as GST and labour reforms.
"Further, the challenges encountered in phasing out large currency notes and replacing them with new ones may pose risks to the pace of other economic reforms (e.g. Goods and Services Tax, labour, and land reforms)," the report said.
The Bank, however, said that India is expected to regain growth momentum in the coming years, with 7.6 and 7.8 per cent expansion because of various reform initiatives that are expected to unlock domestic supply bottlenecks and raise productivity.
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