"With gross domestic product in the first quarter of (2013-14) expanding at its slowest pace since the global financial crisis, Asian Development Bank revised down its growth forecast to 4.7 per cent from 6 per cent projected in April," it said in its flagship Asian Development Outlook 2013.
The report, presenting a sobering picture of India's outlook said the country's economy has been under pressure with recent depreciation in rupee and capital outflows adding to structural constraints which are weighing heavily on its prospects for returning to a high growth path.
In 2014-15 there could be some moderate improvement, with growth estimated at 5.7 per cent, but below the previous forecast of 6.5 per cent, Asian Development Bank said.
"The recent financial market turbulence is a timely reminder of the need for structural and fiscal reform not just to ensure long-term growth but also to keep financial markets stable in the short-run," said Asian Development Bank Chief Economist Changyong Rhee.
Earlier last month, the Prime Minister's Economic Advisory Council (PMEAC) lowered the growth forecast for the current fiscal to 5.3 per cent from 6.4 per cent.
While, RBI has lowered the growth projection for 2013-14 to 5.5 per cent from its earlier estimate of 5.7 per cent.
Nevertheless, Asian Development Bank said the Indian government has taken a number of steps to address the financial market concerns to revive growth prospects besides expanding the bilateral swap arrangement with Japan to USD 50 billion from USD 15 billion.
The government also indicated its intention to prop up the rupee's stability by deepening financial markets and easing external financing constraints, it said.
Apart from these measures, proper macroeconomic policies should be also continued, the report said.
"Containing inflation pressure, consolidating fiscal positions by reducing general subsidies, and managing well recently passed reform bills to keep fiscal pressures in check should receive high priority," the Asian Development Bank report said.
The authorities should allow exchange rate flexibility to ensure sufficient stock of foreign reserves while balancing its impact on inflation and corporate foreign liabilities, Asian Development Bank said.
In order to convince the market that India still remains on the strong and sustainable growth path, it said the country must strengthen its structural reforms to expedite large infrastructure projects that are delayed and to encourage foreign investment.
"One bright spot is the recent effort at expediting regulatory clearance for several large projects in key infrastructure sectors such as power, roads, and railways by the Cabinet Committee on Investment," it added.
With general elections scheduled in the first half of 2014, it said a new government may help give fresh impetus to resolve "structural problems".
It added that a softer currency and expected pick-up in economic activity in major markets should see Indian exports grow at a faster clip than in 2012-13.
"Policy measures since July 2013 to entice foreign investors back to India to help finance the current account deficit are expected to gain traction in the near future."
On rising prices, the Asian Development Bank report said there has been spike in food and fuel costs on account of currency depreciation, but tighter monetary policy will have some mitigating effect, along with depressed economic activity.
It said inflation for this fiscal is now seen at 6.5 per cent, below the 7.2 per cent forecast in April.