India's economic growth can reach a sustainable 10 per cent and be spread more evenly across the country if the government pursues ambitious and wide-ranging economic reforms, Organisation for Economic Cooperation and Development has said in a survey.

"The government's target of reaching GDP growth of 10 per cent in 2011 is achievable if reforms continue," the OECD said in its first economic survey on India released on Tuesday, adding India is now the world's third largest economy behind the US and China in terms of real prices and purchasing power.

The OECD survey identified labour reforms, infrastructure, need for fully operationalising Competition Commission and a modern bankruptcy law as major challenges for the country to sustain the growth rate.

The survey said the government should continue its programme of increased discipline in public spending, adding, they should be better targeted to help the poor.

"Privatisation of more publicly-owned firms should resume to help improve productivity and profitability," the survey added.

Referring to infrastructure bottlenecks, the OECD survey said, "the country's high rate of economic growth is at risk if infrastructure development does not increase and keep pace with demand."

The survey also recommended reducing tax exemptions to allow more money to be transferred to fund public services in urban areas.

While suggesting removal of ban on FDI in retail shops, the OECD survey said: "It would reduce the high rate of waste of farm products and lower prices for the consumer."

On the banking sector reforms, the report recommended that the government should gradually move out of the public sector banks and stop the practice of mandatory lending to specified sectors.

Referring to the government's policy on special economic zones, it said: "Care needs to be taken as to the extent of tax concessions that are granted."

Taxation policies, it suggested, are needed to be reformed to create a truly national market and improve incentives and release resources for reducing bottlenecks in infrastructure, which are a key constraint on growth.

Pointing out that the number of workers has fallen in the manufacturing sector, the survey stated: "India is not fully exploiting its comparative advantage as a labour-abundant economy."

Making a case for labour reforms, the survey said softening of employment protection clauses should be balanced by an increase in extent of "accrual-based" severance payment.

It further suggested that government should consider consolidation of 46 central and around 200 state labour laws, which are hampering employment generation in the organised sector.

Suggesting privatisation of state-owned companies, the survey said: "The public companies should be controlled by a government investment agency rather than by a sponsoring ministry, in order to separate ownership and policy-making."