"People in our country are impatient for a better quality of life. We will be failing them if we do not think out of the box and act with courage," he said in a televised speech at a function to mark his government's first year in power.

"Bold initiatives are called for on the economic front," he told the gathering of cabinet ministers and top leaders of the ruling coalition.

Analysts say the government needs big-ticket reforms to attract foreign investment and put the economy on a path of 9-10 percent growth -- a rate that would match rival China and make a difference to 260 million people living below the poverty line.

China's $1.4 trillion economy has grown at 8-9 percent a year for the past decade, while India's $600 billion economy has averaged only 6 percent and attracts about as much foreign direct investment in a year as China gets in a month.

Singh said his coalition government, backed by communist parties, should work for the benefit of the poor and manage its resources better.

"I'd like to see an improvement in our public finances at all levels of our government. We must reduce wasteful subsidies and divert these resources into social sector expenditure, investment and employment generation."

India's economy is expected to grow 7 percent in the year to March 2006 and the government has a target of 7 percent to 8 percent for the next few years.

The left-leaning coalition was voted to power last year after the previous government lost support of the poor, who felt they were denied the benefits of rapid economic growth.

"Our government has the obligation to ensure that the benefits of growth reach all sections of society," he said.