The finance ministry's report called for a selldown in stakes of state-run companies to generate Rs 250 billion ($5.23 billion) annually, reform of fertiliser and food subsidies, and an auction of third-generation mobile phone spectrum that it said should be freely tradeable.

It also called for "greater urgency" to removing hurdles to investment in infrastructure by government and the private sector.

While the central bank has slashed interest rates by 425 basis points since October to revive demand, real rates remain high and continue to act as a brake on loan growth.

"The expectation that there could be further cuts in policy rates and in lending rates may have resulted in investment decisions beng deferred," the report said.

It also called for implementation of a goods and services tax (GST) by April 2010 to maximise revenues and simplify the tax regime.

The report said government should take advantage of the recent low price in oil costs to free petrol and diesel prices.

Late on Wednesday, India unexpectedly raised gasoline and diesel prices by as much as 10 per cent, passing onto consumers some of the cost of the recent rise in global oil prices.

India imports about 70 per cent of the oil it uses and accumulated a huge burden when it kept prices artificially low as global prices hit a record $147 per barrel last year.