New Delhi, Nov. 8: India will “wind” down the fiscal stimulus from next year and work to accelerate the pace of financial reforms as the economy pulls out from a slowdown that has seen industry shrinking and jobs lost.

“Like many other countries, we resorted to a significant stimulus and we will take appropriate action next year to wind this down,” Prime Minister Manmohan Singh told the India Economic Summit in New Delhi organised by the World Economic Forum and the CII.

Since December, in the face of the economic slowdown induced by the world plunging into recession, the Indian government had announced economic stimulus packages involving tax giveaways of Rs 40,000 crore.

“There are clear signs of an upturn in the economy. In the current year, growth is expected to be 6.5 per cent. Next year, we hope to achieve a growth rate of over 7 per cent,” Singh said.

A string of Wall Street bank failures, which saw the Western world spin into recession, had unraveled India’s export story; exporters suffered huge losses and retrenched lakhs of employees.

The knock-on effect of recession on India’s economy saw manufacturing growth contracting by 0.2 per cent in October-December 2008.

Industry has since recovered and clocked 6.8 per cent in July, following up on a 8.2 per cent growth in June.

Consumer durables grew by nearly 20 per cent, with car sales growing by a massive 31 per cent. Indian companies are expected to give the highest salary increase of 9.2 per cent in the Asia-Pacific region next year, after giving a raise of just above 6 per cent in 2009, according to a survey conducted by HR consulting firm Hewitt Associates.

Singh is the first top government leader to speak on the possibility of pruning the stimulus packages, which include import duty cuts and domestic tax reliefs. Finance minister Pranab Mukherjee at a conference of economic editors last week had been cautious about the stimulus.

He had said the government would maintain its fiscal stimulus for the time being until uncertainty on account of poor rain and global recession diminished.

Officials said Singh based his decision on forecasts of his economic advisory council, who said industry, including construction, could grow at 8.2 per cent in 2009-10 against 3.9 per cent in the previous year. The service sector could grow 8.2 per cent this year.

Singh told the industrialists in the conclave that “in the coming months and years, I hope to see a decisive change in the pace of our progress to become a leading economy in the world”.

India needs to develop long-term debt markets, a corporate bond market, strong insurance and pension sectors and futures markets.

“Some of the reforms needed especially in insurance involve legislative changes. We have taken initiatives in this area and will strive to build political consensus needed for these legislative actions to be completed,” he said.

Besides, divestments have taken place in some PSUs, and more are on the anvil.

“We are better placed than anytime before in recent past to push the reforms process forward,” Singh told potential investors.