HSBC has cut India's growth forecast for this fiscal year to 5.7% from 6.2% projected earlier, citing lack of "reform traction" in the country and weak global economic backdrop.
HSBC said following the disappointing monsoon session in Parliament, there is less hope for a "meaningful" progress on structural reforms in the near term.
Besides, the below normal monsoon is likely to affect the GDP growth of October-December quarter, while weak global economic scenario is likely to impact the economy through trade, finance and confidence channels, it said.
"We have revised down our growth forecast for 2012-13 to 5.7% (as against 6.2% previously)and for financial year 2013-14 to 6.9%(from 7.4% previously)," HSBC said in a research report.
Earlier in September, Morgan Stanley had also lowered India's growth forecast to 5.1% for the current fiscal, from its earlier estimate of 5.8% citing high fiscal deficit and renewed weakness in external demand.
The HSBC report further noted that the country's manufacturing sector is held back by external headwinds and power outages while the services sector is proving to be resilient.
"Nevertheless, in both cases growth is moderate, and with no important policy decisions implemented during the monsoon session the recovery should prove more protracted than expected," HSBC said.
The growth rate in the first quarter (April-June), according to the data released by the government, slipped to 5.5% , from 8% in the same period last fiscal.
In September, a host of global as well as domestic brokerage firms and financial services majors including Moody's, CLSA, Crisil, Citigroup, among others, slashed India's growth forecast for this fiscal to about 5.5% .
Meanwhile, inflation is likely to rise as deficient monsoons push up food inflation and hikes in diesel and kerosene prices finally materialise. Moreover, the supply-led slowdown has kept capacity tight and underlying inflation pressures simmering, the report said.
"In light of this, we believe the RBI will remain on hold next week to further monitor global developments and policy developments out of Delhi on fiscal consolidation and structural reforms," the report said.
RBI's mid-quarterly review of monetary policy is scheduled to be announced on September 17.