NEW DELHI - INDIA'S president said on Thursday that the new government would revive economic growth and help millions of poor with higher spending and expansion of social programmes, despite fears of a growing fiscal gap.

Outlining the new Congress-led government's policies after a resounding election win in May, Pratibha Patil said minority stakes in state-run firms would be sold in a move that could help fund spending.

The government will also take steps to encourage foreign investment inflows, list shares of state-run firms and infuse more capital in banks to help boost economic growth which is at a six-year low.

'The current financial year is expected to see a slowing down of growth on account of the global recession,' Ms Patil said in an address to parliament. 'Our immediate priority must be to focus on management of the economy that will counter the effect of the global slowdown.'

The main BSE index fell as much as 1.8 per cent just after the speech, but quickly pared losses to less than 0.05 per cent in mid-trade. Investors were disappointed about the lack of clear reforms in the speech.

'She has not said anything concrete about financial reform. The market was expecting something more specific, but the speech turned out to be a non-event,' Arun Kejriwal, a strategist at research firm KRIS, said.

Populist scheme

Ms Patil said the government would expand programmes like the rural job scheme and enact a food security law to guarantee cheap grains for poor families, in a nod to millions of poor Indians that helped the Congress party to election victory in May.

'My government will ensure that the growth process is not only accelerated but also made socially and regionally more inclusive and equitable,' Ms Patil said in a speech given a month ahead of the new government's first budget.

The Congress's re-election victory brought hopes that the ruling coalition would be able to move forward with reforms that had been shackled by its former communist allies in the last 2004-2009 government. But the social schemes that underpin much of the Congress party's support worry many investors, who would like to see more economic reforms such as privatisations and the opening up of the insurance and pensions sectors.

'Unless the government demonstrates a firm commitment to long term sustainability of fiscal programmes, just talking about various developmental programmes that would add further burden on the fiscal exchequer doesn't give enough confidence,' said Rupa Rege Nitsure, chief economist at the Bank of Baroda in Mumbai. -- THOMSON REUTERS