The former Tory peer also claimed Indian families had a different mentality to Pakistani and Bangladeshi communities in the UK.
"Indians have fallen into the pattern here," she told peers. "They do not have large families because they are like the Jews of old. They want their children to be educated.
"This is the other problem - there is no emphasis on education in the Pakistani and Bangladeshi families."
Baroness Flather called for a gradual reduction in benefits in order to discourage large families and suggested payments should be reduced after a couple's first two children.
She said: "I really feel that for the first two children there should be a full raft of benefits, for the third child three-quarters and for the fourth child a half."
Baroness Flather's comments were not well-received by Labour work and pensions spokesman Lord McKenzie.
You cannot beat the Tories for giving out the truth and then telling people my people the Indian community do not have large families, they do not well I must be missing something unless my town has something in the water.
As for labour well they will protect the immigrants while telling the disabled your breeding to many cripples.