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Morgan Stanley and HSBC each cut their India's economic growth forecasts for 2013/14 to 6% from 6.2% to reflect lower-than-expected growth in the October-December quarter.
HSBC says it expects 50 basis points of additional rate cuts in the calendar year 2013, and "a slightly more protracted recovery" in India.
Morgan Stanley said the domestic and external environment still remain "challenging," but it expects a gradual recovery.
The Indian economy grew by 4.5% in the October-December period of the current financial year, pulled down by poor performance of farm, manufacturing and mining sectors.
GDP growth bottomed out in the quarter ended December 2012 and going forward the country is likely to see an improvement in agriculture growth, a slight pick up in export growth that also supports manufacturing and trade services, it said.
Some of the other factors that would help in healing the economy include moderation in inflation and further gradual monetary easing and continued policy measures from the government, which should help stabilise private capex as a percentage of GDP, Morgan Stanley added.
"Taking into account these factors, we are currently building in a gradual recovery in GDP growth in FY2014 to 6% (while lower than our earlier estimate of 6.2%) as compared to our estimate of 5.1% for FY2013. We believe that the initial phase of recovery will be driven by an improvement in productivity growth rather than a big rise in investment to GDP. We expect the government to continue to take policy measures that will slowly improve productivity and the growth mix," the Morgan Stanley report said.
Indian economy is estimated to have grown 5% in 2012-13. The Finance Ministry's Economic Survey of 2012-13 has predicted a growth rate of 6.1-6.7% for the next fiscal.
