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NEW DELHI (Reuters) - Prime Minister Manmohan Singh summoned officials on Wednesday to formulate an economic revival plan in part addressing problems in tax policy and said he also wanted to revive the "animal spirit" of Indian economic growth.
Seeking to overcome pessimism about Asia's third-largest economy, Singh, in remarks released by his office, stressed that improving investor sentiment was a top priority.
A slowdown in the insurance industry must also be addressed and, in a rallying call to assembled officials, he called on them to "revive the animal spirit in the country's economy".
Singh takes the helm of the finance ministry at a time when economic growth has dipped to its slowest pace in nine years, the rupee has hit all-time lows against the dollar, the government is grappling with bloated fiscal and current account deficits and inflation remains stubbornly high.
"I'm glad he's talking about specifics rather than broad-brush issues," said Abheek Barua, chief economist at HDFC Bank in New Delhi. "It's a move forward from what was happening earlier."
Despite being hailed as the architect of landmark economic reforms in 1991, Singh struggled to put his stamp on the economy after becoming prime minister in 2004.
Business leaders and economists have harshly criticised his government's management of the economy, accusing it of complacency in the face of the economic slowdown.
Finance Minister Pranab Mukherjee stepped down on Tuesday to run for president, allowing Singh to step in.
"The growth rate has taken a dip; the industrial performance is not satisfactory; things are not rosy on the investment front; inflation continues to be a problem," he told officials at the meeting in his office.
"On the external front, I am concerned about the way the exchange rate is going. Investor sentiment is down and capital flows are drying up."
Investors have been pushing the Indian government to cut its fuel subsidy bill and implement a shelved reform to open up its $450 billion retail sector to foreign supermarkets. Singh discussed both issues with the officials but no decisions were taken, a source who attended the meeting said.
"We need to work to get the economy going again and restart the India growth story," Singh told the officials, according to his office.
"There are problems on the tax front which need to be addressed," he added.
"The insurance sector has seen a slowing down which is not normal in a country with large unmet insurance needs. This needs to be looked into." he said, without going into specifics.
Earlier this year India put on hold a controversial plan that would retroactively tax some transactions. Meanwhile, implementation of a plan to streamline taxes through a national Goods and Services Tax has been stalled.
In the crowded insurance industry, a long-pending increase in foreign investor holdings is on hold and many joint ventures with foreign partners are losing money.
Singh called for a resolution of problems in the mutual fund sector, where a regulatory change banning distribution fees has squeezed profits.
"I'm glad he actually referred to a couple of sectors which certainly have problems that need to be addressed urgently," HDFC's Barua said.
India's economic growth slipped to 5.3 percent in the first three months of this year compared to 9.2 percent in the same quarter of 2011.
The government's immediate emphasis is to manage its balance of payments, said Singh, who is expected to handle the finance portfolio until September
"In the short run we need to revive investor sentiment, both domestic and international," he added. "Millions of our countrymen look up to the government to throw open channels for their progress, prosperity and welfare."
Reporting by Matthias Williams, additional reporting by Rajesh Kumar Singh and Tony Munroe, editing by Michael Roddy