In its latest ‘Inside India‘ report, Moody’s Investors Service said the consensus view on India’s economic growth prospects is relatively optimistic and in line with Moody’s baseline forecast of 7.5% expansion in current fiscal.

The agency said it expects India’s weakened rural economy to remain subdued through this fiscal, particularly if the risk of below-average monsoon rainfall materialises.

“A sustained soft patch for India’s rural economy would weigh on private consumption and non-performing assets in the agricultural sector, which is a credit negative for the sovereign and banks,” Moody’s vice-president and senior research analyst Rahul Ghoshsaid.

“Forecast represents the highest projection amongst G20 economies, and provides a key pillar of support for the Baa3 sovereign rating and positive outlook,” said the rating agency. This is the lowest investment grade rating, but a ”positive” outlook indicates room for further upgrade.

However, the results of the latest polls conducted by it have thrown up “some disappointment” with regard to the pace of reforms by the Modi government, and increasing concerns over slow-paced reform process as well as the “ongoing policy stagnation”.

The rating agency said there are growing concerns about risk of policy stagnation and that “some disappointment” has emerged over the pace of reforms under the Modi government.

“Specifically, almost half of the poll respondents identified sluggish reform momentum as the greatest risk to India’s macroeconomic story.”

“The multi-party, federal democracy in India underpins a gradual pace of policy implementation” and many of the policies are positive for India’s institutional strength.

However, the direct impact of growth-enhancing reforms is only likely to take full effect over a multi-year horizon, it said.

Moody’s raised the concerns on a day when core sectors in the country locked themselves into a faster growth trajectory, after reporting a long muted growth. Electric generation, coal and refinery products have recorded faster growth in May.

The output of eight infrastructure sectors expanded by 4.4% in May, the highest growth rate in past six months, and up from 3.8% in May 2014. The growth comes after a decline in the output posted in previous two months of March and April. The core sectors had expanded at a rate of 3.8% in May 2014.

The core sectors’ growth rate in May this year is the highest since November 2014, when these segments reported a 6.7% jump.

Despite the new government’s focus on building infrastructure, the sector saw its fortunes take a turn for worse by 2014-end. The growth rate of core sector industries fell to 2.4% in December 2014, from 6.7% in the previous month, and then, to 1.8% in January and 1.4% in February. The overall growth of eight core industries in the entire 2014-15 fiscal stood at 3.5% against 4.2% in the previous fiscal.

The growth in May 2015 was driven by healthy output of coal (7.8%), refinery products (7.9%) and electricity generation (5.5%). Crude oil production went up 0.8% while steel and cement grew 2.6%. Fertiliser output grew 1.3%. Natural gas, however, recorded a negative growth of 3.1% in May 2015.

In March and April, the eight sectors, which contribute 38% to overall industrial production, had declined 0.1% and 0.4%, respectively.

During April-May period of the current fiscal, the sectors’ output expanded 2.1% as against 4.7% in the same period last year.