India needs bold reforms to achieve true potential, says HSBC

It expects CPI inflation to slow down to 4.8% in the current financial year

India is in the midst of a gradual recovery and expected to clock a growth of 7.6% during the fiscal, but to meet its true potential, reforms, especially in land and labour will need to be "bolder", says an HSBC report.

The main determinant of medium-term high and sustainable economic growth is meaningful reforms and so far they have been gradual and 'project-specific', the global financial services firm said.

"For India to meet its true potential, reforms in land, labour and legislation will need to be bolder. Until then, GDP growth is likely to recover more gradually at 7.6% in FY16 (7.8% previously), 7.8% in FY17 (8.3% previously) and 8.2% in FY18; still among the highest in the world," added the report.

The April-June quarter GDP slipped to 7% from 7.5% in the preceding quarter.

Reserve Bank on September 29 effected a more-than-expected interest rate cut of half a% to boost the economy.

The apex bank had also lowered its economic growth forecast for the current fiscal to 7.4% from its previous projection of 7.6%.

HSBC expects CPI inflation to slow down to 4.8% in the current financial year but is likely to rise to 5.5% in the financial year 2017 on the back of low base and improving growth.

Moreover, current account deficit, is expected to narrow further to 1% this fiscal taking cue from weak global commodity prices.

According to HSBC, an extended El Nino effect is a risk to its forecast, as it could depress rural growth further and stoke food prices.

The key risk to medium-term growth is a slackening in the reform process and the inability of public investments to "crowd in" the private sector, it added.