Hi Amit,
If there is no defect in your LCD and your phone still works smoothly (as you mentioned), then only the digitizer glass is broken (although it still works).
I suggest replacing the digitizer. LCD and digitizer can be separated from one another and can be bought separately. Take a look at [http://www.youtube.com/watch?v=i7S1LlJ1WXs|this video clip].
You can get a digitizer [http://www.ebay.com/sch/i.html?_trksid=p2050601.m570.l1313.TR10.TRC2&_nkw=htc+desire+digitizer&_sacat=0&_from=R40|here].
Steffen