India's Singh says to speed up sale of stakes in state firms

India will speed up the sale of stakes in state companies to revive the stock market and will push ahead with reforms aimed at spurring an investment recovery in the flagging economy, Prime Minister Manmohan Singh said on Saturday.

Selling equity in large public industries is a central plank of the government's plan to bring down a wide fiscal deficit, a major weakness in Asia's third largest economy.

This week, the sale of 10 percent in state miner NMDC raised $1.1 billion and the government is aiming for 300 billion rupees from such partial privatizations by March.

"We will speed up the disinvestment process, which will also revive our equity markets," Singh told a gathering of industry representatives in New Delhi.

However, he did not give details of a new timetable for the sales, which is due to include energy exploration major Oil India.

Singh's government has recently taken measures to allow in foreign supermarkets and tackle budget-busting fuel subsidies.

"The steps we have taken are only the beginning of a process to revive economy and take it back to its growth rate of 8 to 9 percent," Singh said.

Economic growth slowed to 5.4 percent in the first half of this fiscal year and is on track to grow at its slowest rate in a decade.

Slowing exports and foreign investment have widened the current account deficit.

Global ratings agencies have repeatedly warned India that it faces a credit downgrade if it does not tackle a high debt burden and the fiscal deficit, which is the largest among major emerging economies.

Last year, the deficit was 5.8 percent of gross domestic product, which Singh said was "clearly unsustainable". He reiterated the official target of reducing it to 5.3 percent this year.

"The government is serious about moving in this direction," Singh said.

Raghuram Rajan, the government's chief economic adviser, said that reining in the deficit was essential to attract more investment.

"Clearly a fiscal path that is credible is the next important step so that we retake the confidence of our investors," Rajan said, at the same event. He said he hoped increased buoyancy in the stock market would prompt businesses to start investing more.

"Business is sitting on a lot of cash, if they start investing some of that, the momentum starts picking up."

Recent reforms have helped Mumbai's benchmark Sensex index rally strongly and it is expected to end 2012 up by about 25 percent, despite the slow economy, stubbornly high inflation, and a record current account deficit.

(Reporting by Manoj Kumar and Arup Roychoudhury; Writing by Frank Jack Daniel)