The OECD, a club of rich nations, today raised India's growth forecast to 5.9 per cent for the current year and urged the new government to restore fiscal discipline and move ahead with disinvestment.
"With the gradual recovery of the global economy and easier financial conditions, growth is projected to gradually regain momentum," said Organisation for Economic Cooperation and Development (OECD), a group of 30 developed nations.
The OECD, in March, projected 4.3 per cent economic expansion for India in 2009.
"In India, growth is predicted to slow to 5.9 per cent in 2009 before accelerating to 7.2 per cent in 2010 (March forecast was 4.3 per cent and 5.8 per cent)," the OECD said in its latest Economic Outlook report.
Pointing out that combined fiscal deficit of the Centre and state governments would go up to 11 per cent of the GDP during 2009, the report said, adding, "The new government will face the need to restore fiscal discipline, speed up structural reform and increase sales of public sector assets.
"Any further easing in policy should be achieved through lower interest rates, rather than discretionary fiscal expansion."
The report further said the extent of the deterioration in the fiscal position prior to the slowdown has reduced the scope for "discretionary fiscal policy action".