Prime Minister Manmohan Singh said he wanted reduction in the fiscal and revenue deficits, an increase in public investment, and cuts on wasteful subsidies.
He defended the fiscal stimulus and said it had helped in maintaining reasonable growth but added the fiscal challenge was immediate.
He was addressing members of the United Progressive Alliance (UPA) on the second anniversary of the second spell of the UPA government.
Singh flagged rising fuel prices as a concern.
At a time when the government had okayed the raising of petrol prices and was debating an increase in diesel and kerosene prices, he said "As an importer of oil we have to adopt rational pricing policies. This is not just prudent fiscal management. This is a national security imperative. India cannot become too dependent on external sources of energy."
Singh also said India must not become too dependent on world markets for food. "The Indian farmer has to be empowered with better prices, better policies, better access to finance, to technology, to infrastructure and to markets," he said.
He said since the UPA had come to power seven years earlier, the economy had grown at 8.5 per cent yearly, despite a global financial crisis.
Against a background of a debate in government on growth versus ecological concerns, Singh adressed the issue squarely and said growth needs to be ecologically sustainable.
"This means we seek to build a low carbon economy. This calls for investment in research and development of alternative sources of energy, including nuclear energy. We seek globally open markets and access to technologies that will improve the quality of life of our people, especially the poor."
He said if everyone worked hard and honestly, India could become the world's fastest growing economy, from being at second place.
