The Organization of Economic Co-operation and Development said structural reforms would raise India's economic growth, but in their absence, growth will remain below 8 percent.
In the latest OECD Economic Survey of India released Wednesday, the Paris-based OECD said the economy will grow 5.4 percent in 2014-15 and 6.6 percent in 2015-16. For the fiscal 2016-17, it projected 6.8 percent growth.
Infrastructure bottlenecks, a cumbersome business environment, complex and distorting taxes, inadequate education and training and outdated labor laws are increasingly impeding growth and job creation.
"Key reforms in the business environment, to labor markets and to infrastructure will bring economic growth back to the higher levels seen in the recent past, create good jobs and improve well-being for all Indians," OECD Chief Economist Catherine Mann said.
The OECD expects inflation to ease to 5.4 percent in 2015-16 from 6.9 percent in 2014-15.
The think tank called for a flexible inflation-targeting framework, which will help contain inflation expectations and provide support for saving and investment.
It advised the government to implement a broad national value-added tax and to lower energy subsidies, as part of wider efforts to put public finances on a stronger footing.
The report also highlighted the long-term challenges to India. It should create better-quality jobs for those in the informal sector as well as provide employment for the massive influx of young people into the labor force, OECD said.
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