HSBC cuts India growth forecasts for fiscal years 2013, 2014

In April and June last year, another rating agency S&P, had warned of further downgrades, which would put India into a junk status from the current lowest investment grade rating of BBB-.

HSBC, however, lauded the government's reforms push and said: "All in all, policy in India is moving in the right direction and the reforms will likely continue to inch forward, although much still needs to done and some of the bills may not passed in the near term".

"However, it is important to be realistic about how long this will take. These types of policies need time to kick in," the report added.

HSBC said India is likely to see a gradual recovery in growth as reforms process gathers pace and implementation of infrastructure projects pick up, which in turn would help alleviate supply side constraints and slowly revive the investment cycle.

Moreover, a gradual stabilisation of global economic conditions during 2013 would also help support the moderate recovery, HSBC said.

In the first half of FY13, the GDP clipped at a poor 5.4 per cent, and the government expects to close the fiscal year under 5.7 per cent.

Over the medium term it is crucial for the government to continue the consolidation efforts at both the central and state government level, to achieve fiscal sustainability, which would eventually help to bring growth back to the levels seen a few years ago.

Earlier in September last year, HSBC had cut India's growth forecast for 2012-13 to 5.7 per cent from 6.2 per cent projected, citing lack of 'reform traction' in the country and weak global economic backdrop.

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