"The restoration of confidence of the actors of Indian financial system would be faster if the interest and exchange rates are not volatile," National Council for Applied Economic Research (NCAER) said in its monthly report Macrotrack released.

The report also underlined the need for providing fiscal incentives for large projects in the infrastructure sector to boost the economic growth at a time when the world is reeling under the financial meltdown and India is feeling its heat.

"The investment climate in areas such as infrastructure needs to be nurtured through fiscal incentives, and more importantly, by making the implementation of the projects more efficient," the report said.

The government, it added, should also look at other policy actions such as strengthening of the regulatory systems which could provide ample warnings about the impending crisis of the nature that the world is witnessing today.

Referring to the impact of crisis on the country, the report said, "India could post significant growth in the current as well as the coming year, given the relative dominance of the domestic sector on the overall economy".

However, drop in the value of capital would impact the new investments in the short and medium term, it said, adding "The shocks resulting from the withdrawal of private capital from the emerging economies would be high for India".

In the long run, the report said, the prospects of growth led by the fundamental forces such as the increase in workforce, growth in savings and technological progress would remain strong.

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