As government is struggling to win back investors, Morgan Stanley on Monday painted a more pessimistic picture of Indian economy by slashing its growth forecast for the country's current fiscal year.

Morgan Stanley slashed its growth forecast for Indian economy to 5.1 per cent for the fiscal year of 2012-13, from its earlier projection of 5.8 per cent.

The investment bank warned that the Asia's third-largest economy could suffer a "very high risk" of seeing its economy slowing to merely 4.3 per cent in the 2013 fiscal year unless the government took insistent steps to slash the fiscal deficit and boost private investment.

Amid continuing deterioration in the macro environment, Morgan Stanley also slashed its growth forecast for fiscal year of 2013-14 to 6.1 per cent.

Slashing grow forecast for Indian economy, Morgan Stanley said, "We believe there is an urgent need for policy action from the government to address the deterioration in the fiscal deficit and persistent pull-back in private investment."

Meanwhile, the government is enduring the fury of BJP-led opposition over the coal block allocations scandal. The Opposition has been demanding Prime Minister Manmohan Singh's resignation and the cancellation of all the coal block allocations, which according to the CAG report cost the taxpayers 1.86 lakh crore.

The list of corporate giants that are facing possible cancellation of coal mining licences includes Tata Power, ArcelorMittal, Aditya Birla Group's Hindalco Industries Ltd, and GVK Power & Infrastructure.