The ratings agency currently rates India at Baa3
The pay hike has been made effective from January 1, 2016.
The RBI said there is an upward bias on inflation projection.
Moody's expects macroeconomic policies to contribute to sustained robust growth.
Moody's listed six agenda on the list of pending reforms -- land acquisition Bill, labour law reforms, significant infrastructure investment, tangible benefit from Make in India initiative, tax administration and PSU bank reforms
The prospect of further falls in remittances is a hindrance for the Reserve Bank of India, as it seeks to bullet-proof the economy against sudden capital outflows
Moody's said implementation challenges, in addition to affecting growth and government revenues, will impact corporates by lowering sales volumes and cash flows.
'We forecast real GDP growth to moderate to 6.7 per cent in the year ending March 2018.' 'However, as disruption fades, we expect to see a rebound in real GDP growth to 7.5 per cent in the next fiscal year.'
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