According to the IMF report, India retains its rank as the world's fastest-growing major economy with a projected growth rate of 6.1 per cent for the current fiscal year, despite an almost one per cent cut in the forecast. (Also read: Is world economy facing first recession since 2009?)

In comparison, the Chinese economy - which grew 6.6 per cent in 2018 - is expected to grow 6.1 per cent rate in 2019 and 5.8 per cent in 2020, according to the IMF.

It is important for India to keep fiscal deficit in check, even though its revenue projections look optimistic, said IMF Chief Economist Gita Gopinath.

Growth will be supported by the "lagged effects" of monetary policy easing, a reduction in corporate income tax rates, and recent measures to address corporate and environmental regulations, according to the IMF report.

The government has over the past two months announced a range of measures to revive growth, which stood at a more than six-year low in the June quarter.

It has withdrawn higher taxes on foreign investors - as announced in Budget, announced a mega consolidation plan for state-run banks and slashed the corporate taxes by almost 10 percentage points to push consumption and growth.

On the monetary policy front, the Reserve Bank of India (RBI) has lowered the key interest rates five times so far this year, by a cumulative 135 basis points (1.35 percentage point). This month, the RBI lowered its growth projection for the current fiscal year to 6.1 per cent from 6.9 per cent projected in August.

"In India, growth softened in 2019 as corporate and environmental regulatory uncertainty, together with concerns about the health of the non-bank financial sector, weighed on-demand," the IMF added.

The country's financial sector is struggling against more than Rs 10 lakh crore of non-performing assets or bad loans. State-run banks account for the lion's share of this amount.