NEW DELHI: India is emerging from its worst economic slowdown in a quarter-century, but needs big structural reforms to return to the eight-percent-plus growth needed to generate jobs for its burgeoning young population, the OECD said.

The Organization for Economic Cooperation and Development left unchanged its 5.4-percent-growth forecast for this financial year to March 30, 2015 — a figure broadly in line with government projections and up from 4.7 percent expansion posted by India last year.

But the Paris-based OECD revised upwards its forecast for next year, projecting Asia’s third-largest economy will expand by 6.6 percent — compared to its 5.7-percent estimate in May.

“The Indian economy is coming out of some tough times,” OECD chief economist Catherine Mann said.

India’s growth has languished below five percent for the last two years, the longest weak growth spell in 25 years, hit by high interest rates, stubborn inflation and weak investment.

The economy should grow by 6.8 percent in the 2016-17 year, the OECD’s India Economic Survey added, bolstered by economic reforms already introduced by the government of Narendra Modi which swept to power in May.

Despite the forecast growth, significant structural reforms are needed to return to the near double-digit figures of the past.

“Structural reforms would help return India’s growth to the near double-digit levels of the previous decade,” the OECD said, adding it was “critical” to remove major economic bottlenecks.

“Structural reforms” is economic shorthand for changes such as deregulation, better governance and improvements to public finances.

The report warned that without such steps, expansion “will remain below the eight-per-cent growth achieved during the previous decade.”

India needs close to nine-to-10-percent growth to generate jobs for millions of young people who join the workforce each year, economists say.

“Key reforms in the business environment, to labor markets and to infrastructure will bring economic growth back to higher levels seen in the recent past,” Mann said.

Dilapidated roads, railways and other infrastructure, inadequate education and training and rigid hire-and-fire laws “are increasingly impeding growth and job-creation,” the report added.

Modi, whose Bharatiya Janata Party government is viewed as more pro-business than its left-leaning Congress predecessor, has already started chopping away at India’s thicket of regulations considered by companies to be one of their key challenges.

But the government must do more to simplify India’s infamous red tape to speed up commissioning of infrastructure projects and spur growth, the report said.

Uncertainty surrounding complex and costly land acquisition rules is holding up projects that could help decrease supply-chain bottlenecks and reduce input costs fueling inflation, the report added.

It was also imperative the government press ahead with a long-pending national goods and services tax to eliminate a patchwork of levies and create a single internal market, the report said.

The government is expected to introduce in the next parliamentary session the tax reform that could slash business transaction costs and lift growth by nearly two percentage points, according to the National Council of Applied Economic Research.