HSBC lowered India's growth forecast for this fiscal year to 5.5 per cent from 6 per cent citing slow reform process.
HSBC said growth has been in line with its expectations in 2013, but slower reform progress will delay the recovery.
In a note, HSBC said, "While we expect further progress on reforms, it will only materialise slowly. Moreover, the global recovery is likely to come later. The recovery in India will, therefore, prove even more protracted."
HSBC has, consequently, cut growth forecast for FY2014 to 5.5 per cent (vs 6 per cent) and FY2015 to 6.6 per cent (vs 7.1 per cent), the note said.
The government has pushed through numerous reform measures over the past nine months. However, implementation and announcements have tapered off recently and could slow even further, it said.
"This monsoon parliamentary session will prove an important test for the government's ability to sustain the reform push," HSBC said.
On the inflation front, HSBC said the decline in global commodity prices is likely to continue in the near term, but, in the second half of the fiscal year, inflation is likely to gradually pick up, as growth recovers and global commodity prices firm.
The report further said though the fiscal deficit has came in below 5 per cent of GDP last fiscal year and the trade balance has improved. The fiscal deficit is not likely to narrow further in FY2014, on account of both revenue and expenditure slippage.
"While we forecast the current account deficit to narrow in coming years, it will remain elevated and a concern," HSBC said.