OECD sees India's growth at 8%

Besides, "quick action to write off small farmers' debt would also add substantially to demand," the OECD indicated in its latest Economic Outlook, arguing that if the government will have to raise petroleum prices if there is no immediate fall in international oil prices.

"In such circumstances, inflationary expectations might deteriorate and the current account deficit widen," the Paris body warned.

India, which is currently having enhanced engagement with OECD, needs to be cautious about its restrictive monetary policy. "With a more restrictive monetary policy stance and a more normal harvest, output growth is projected to gradually slow to below 8 per cent in 2008 and then recover slightly in 2009," the OECD indicated.

With world food prices stabilising, the rise in the consumer price index is expected to ease back to 5.5 per cent in 2009, the global think tank said.