Buoyed by improved sentiments of investors, India's GDP growth rate is expected to strengthen further, while inflation is likely to ease in the coming quarters due to base effects, according to an HSBC report.
"Looking ahead, growth is likely to strengthen, supported by better sentiment, whereas inflation will ease notably due to base effects," HSBC said in a research note.
Indian economy which grew 5.7 per cent in April-June quarter is expected to be between 5.4-5.9 per cent in the current fiscal, said the report.
"To support the recovery, the new government will need to pick up the pace of reforms and quickly address supply side issues in the economy," HSBC said.
Further, the report added that even though there is an improved prospect for inflation, the RBI is likely to keep the policy rate unchanged in the near term, in order to contain CPI \to under 6 per cent by January 2016.
CPI inflation moderated to 7.8 per cent year-on-year in August (as against 8.0 per cent year-on-year in July). The wholesale inflation also fell to a nearly five year low of 3.74 per cent in August.
The report further noted that meeting the CPI target of 6 per cent by 2016 would prove "challenging" since stronger growth can lift price pressures next year.