Prime Minister Narendra Modi has been dealt a double blow by the United States government, within a month of his address to the joint session of the US Congress on June 8.
The Obama government has said in a report that India's economic growth rate may be "overstated", apart from voicing concern that Modi has not been able to match his announcements on economic reforms with real changes.
"Ostensibly, India is one of the fastest growing countries in the world, but this depressed investor sentiment suggests the approximately 7.5 per cent growth rate may be overstated," the report titled "Investment Climate Statements for 2016" prepared by the U.S. State Department, said, reported PTI.
The report said the BJP-led NDA government has made improvements in areas such as streamlining regulatory laws, minimising uncertainty over taxes, removing infrastructure hurdles and taking measures to reduce power shortage.
The State Department revised its India growth projections for the current year, saying the South Asian economy may not benefit as much from low crude oil prices as it did last year.
The report comes days after an analyst at Morgan Stanley raised doubts over India's GDP figures that showed Asia's third-largest economy grew at 7.6 percent in 2015-16, the fastest in five years.
"I think India's GDP data is overstated," Ruchir Sharma, Morgan Stanley's Chief Global Strategist, told PTI last Sunday. He expressed concern that investments by the private sector were yet to pick up.
The questions on India's GDP growth rates first emerged when the country revised its calculation in February last year to measure economic activity. Sharma had then said that the revised figures were a "bad joke" and were tantamount to "rewriting history".
The record foreign direct investment (FDI) inflows into India stood out as a positive development, according to Sharma.
The Modi government has projected a growth rate of 7-7.75 percent for the current financial year.
"...the Indian economy stands out as a haven of macroeconomic stability, resilience and optimism and can be expected to register GDP growth that could be in the range of 7.0 per cent to 7.75 per cent in the coming year," according to the Economic Survey released before the budget in February this year.
The optimistic projection was based on a good monsoon and better fiscal management by the government by controlling the fiscal deficit at 3.5 percent of the GDP.