Successive increases in interest rates instituted by the central bank can retard India's economic growth to eight per cent in 2008, warns the Organisation for Economic Cooperation and Development (OECD).
At the same time, says the grouping of 30 rich nations, the Indian government's target of 10 per cent growth by 2011 and complete elimination of poverty can be achieved if economic reforms continue.
The Indian economy had grown by 9.4 per cent in fiscal 2007.
"A series of economic reforms would allow India to reach a sustainable growth of 10 per cent," said Angel Gurria, secretary general of OECD, while releasing the organisation's first Economic Survey of India.
He specifically mentioned four areas where reforms were necessary to lift growth - improving the business environment, infrastructure, public finances and labour market reform.
India is not a member of the OECD but the organisation watches the country very closely, along with a handful of others like Brazil, China and South Africa, because of the size of its economy and future potential.