Morgan Stanley raises India's GDP forecast to 5.4 pc for FY13

However, the pace of recovery will be slow in view of macro stability challenges such as high inflation, current account deficit and loan-deposit ratio, Morgan Stanley said adding it has kept its GDP projections for FY14 unchanged at 6.2 per cent in line with this view.

"We raise our GDP growth forecast for F2013 to 5.4 per cent from 5.1 per cent based on the better than expected GDP growth for quarter ended September and also stabilisation in non-agriculture growth indicators," Morgan Stanley said in a research note.

According to the global financial services firm, the headline GDP growth of India will be at 5.4 per cent in FY2013 (up from 5.1 per cent projected earlier) and 6.2 per cent (unchanged) in F2014.

The Indian economy registered a GDP growth of 5.3 per cent for the quarter ended September. The economy grew by 5.5 per cent growth in the June quarter and 6.7 per cent in the quarter ended September 30, 2011.

"We believe that headline GDP growth will begin to show a gradual recovery trend in the quarter ending March 2013: We look for farm output to normalise and non-agriculture output to continue to improve, albeit slowly," the report said.