Despite the upward revision of its GDP growth forecast, Moody's warned that the farm output was likely to decline till December, impacting overall GDP growth. 'The robust momentum in manufacturing during recent months may be unsustainable in the near term,' Chan said.

'Policymakers certainly cannot rule out chances of a dip in the September quarter before activity continues with its mild upward trend,' Chan said.

'Public expenditure is expected to slow significantly, offset by private investment, as the government attempts to restore fiscal discipline.'

Nevertheless, she added, India's medium-term prospects were 'rosy', and that GDP growth would accelerate to 7.2 percent next fiscal and further accelerate to touch 9 percent in 2012-2013.