"Irrespective of the headline 7 percent GDP which slowed from 7.5 percent in the March quarter, it is clear from various high frequency indicators (PMI, credit growth, non-oil-non-gold imports, low capacity utilisation) that underlying economic momentum remains weak and may need further policy support to facilitate a robust recovery," the global financial services major said in a report.
    
However, the spillover risks from continued volatility in global markets or potential disorderly exchange rate movement in other emerging market currencies, can delay a rate decision by Governor Raghuram Rajan, "but that is not our base case scenario at this juncture," the report by its fixed income group added.
    
Citing the sluggish economic recovery as the main reason for a rate cut, the report noted that the Q1 GDP print moderated to 7 percent from 7.5 percent in the previous quarter, with net exports contracting and private consumption slowing down.
    
The bank, however, maintained its previous forecast of 7.5 percent GDP growth for the year, but warned of "downside risks to this forecast, given a slower investment recovery and weak exports momentum."

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