The Indian economy is going through a cyclical slowdown led by both slower external demand and domestic challenges. We expect a shallow recovery, and growth to improve to ~7.1 percent in H2FY20 from 6.2 percent in H1FY20, said Morgan Stanley in its research report.

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It said, "There are key domestic challenges facing the economy- risk aversion among lenders, risk aversion in the corporate sector, and prolonged weakness in the capex cycle. The domestic challenges facing the economy have to be juxtaposed against a weak outlook for global growth, which has been affected by the ongoing trade tensions."

"At a time when external challenges are lingering and domestic issues are still in play, we see a need a concerted push on the policy front to boost growth and employment," added the research house.

Morgan Stanley further said that the key actions that policymakers should consider in taking in the next 3-4 months are: 1) recapitalizing state-owned banks, 2) measures to improve demand in the real estate sector, 3) continuing to push public infrastructure investment, 4) providing a favourable environment for the private corporate sector investment, and 5) implementing measures to improve India's export competitiveness.

"In our base case, we expect a shallow recovery in H2FY20 reflecting such measures as monetary policy easing, steps to address the capital needs of the SOE banks, and fiscal support to the farmers," the report added.