Nov. 8 (Bloomberg) -- India will “wind” down fiscal stimulus from 2010 as growth in Asia’s third-largest economy recovers to more than 7 percent, Prime Minister Manmohan Singh said today.

“There are clear signs of an upturn in the economy,” Singh told the World Economic Forum’s India Economic Summit in New Delhi. “Like other countries we resorted to a significant stimulus and we will take appropriate action next year to wind this down.”

Singh’s comments came after the U.S., Japan, Australia and other Group of 20 nations said it’s too early to withdraw fiscal steps designed to support global recovery. India’s central bank last month began to tighten monetary policy amid concerns that an inflation flare-up may hit the pockets of close to 800 million Indians who live on less than $2 a day.

“The developed countries seem to be very cohesive in thinking that stimulus should continue,” Rana Kapoor, chief executive officer at Mumbai-based Yes Bank Ltd. said in an interview with Bloomberg News today. “Every nation needs to watch out for country-specific conditions and take actions best suited for them, and that’s what India is doing.”

India is among the first G20 member to tighten policy as the central bank forecasts inflation to accelerate to 6.5 percent by March 31 from 1.51 percent. Asset prices have been climbing as well, evidenced by the 68 percent rise in the key Sensitive index on the Bombay Stock Exchange.

‘Calibrated Way’

The Reserve Bank of India on Oct. 27 ordered lenders to keep more cash in government bonds, raising the statutory liquidity ratio to 25 percent from 24 percent. Governor Duvvuri Subbarao said it was appropriate for the central bank to exit monetary stimulus in a “calibrated way.”

India may consider rolling back fiscal stimulus early in the year starting April 1, Montek Singh Ahluwalia, deputy chairman of the Planning Commission, said in New Delhi today. This would help the government reduce a budget deficit estimated to reach a 16-year high of 6.8 percent of gross domestic product this year.

Singh said India’s economy may grow 6.5 percent in the year ending March 31, constrained by weak monsoon rains that hurt crop production. With better rainfall in the four-month season starting June 2010, the economy may expand over 7 percent in the year commencing April 1, he said.

Global Recovery

“The worst is behind us though the path of global recovery will be long and uncertain,” Singh said. “India has been able to face the global economic downturn better than most other countries in the world.”

The world economy may shrink 1.1 percent in 2009, according to the International Monetary Fund. IMF Managing Director Dominique Strauss-Kahn warned Oct. 23 of the risk of a double- dip recession if countries implement exit strategies too soon.

U.S. Treasury Secretary Timothy Geithner told reporters after a meeting of G20 finance ministers in Scotland yesterday that “it’s too early” to “lean against the recovery.” Government should continue stimulus programs until the recovery is assured, he said.

Japanese Finance Minister Yoshihiko Noda said it’s too soon to start unwinding measures, saying the recovery in his country “still lacks sustainability.” Australian Treasurer Wayne Swan said today government stimulus shouldn’t yet be retracted as winding up the program would threaten jobs and economic recovery.

Countries should withdraw economic stimulus too late rather than too early because the global recovery is likely to be “sluggish” and inflation will stay low, the IMF said in a report prepared for this weekend’s meeting of G20 officials in St. Andrews, Scotland.

“World demand will pick up only slowly,” Singh said today. “Our strategy therefore must aim at sustaining a high rate of growth on the strength of strong domestic demand.”

To contact the reporters on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net. Cherian Thomas in New Delhi at cthomas1@bloomberg.net

Last Updated: November 8, 2009 06:32 EST