Addressing the nation from the Red Fort on the country's 67th Independence Day, he also made it clear that relations with Pakistan can only improve when it checks anti-India activities on its soil.
Speaking in Hindi as usual, the prime minister presented the big picture, placing emphasis on what the Congress-led UPA government had achieved in the last nine years -- and what more could be done on the economic front before the next Lok Sabha election due next year.
In comments laced with political overtones, Manmohan Singh, 81, declared that there was no place "for narrow and sectarian ideologies in a modern, progressive and secular country.
"Such ideologies divide our society and weaken our democracy. We should prevent them from growing," he said in a crisp 35-minute speech, standing behind a bullet-proof enclosure at the Red Fort.
"We need to strengthen those traditions of our country which teach us to promote tolerance and respect for thought processes different from ours."
Thousands of police and paramilitary personnel provided security at the venue. Hundreds of school children dressed in the national tricolour were in the front as Manmohan Singh spoke under an overcast sky.
As if in cue, the clouds poured once Manmohan Singh ended his speech.
Stating that India had witnessed major changes after every decade, the prime minister said there was a need to build an environment of political stability, social cohesion and security.
Manmohan Singh said India desired friendship with all neighbouring countries but relations with Pakistan would improve only when it prevents the use of its territory for anti-India activity.
He also referred to the "dastardly attack" by Pakistani troops this month that killed five Indian soldiers in Jammu and Kashmir and vowed to "take all possible steps to prevent such incidents in the future".
Manmohan Singh asserted that in no other decade had India seen the kind of economic development as in the past 10 years -- when the Congress led United Progressive Alliance (UPA) was in power.
Claiming that his government had worked with "sincerity and honesty", he admitted that India's growth rate had come down to 5 percent.
"We are trying our best to remedy the situation... I believe this phase of slow of growth in India will not last long."
India, he said, had grown in the last nine years at an annual average rate of 7.9 percent. "This pace ... is the highest in any decade so far."
He said the government had taken many steps to speed up the process of clearances for industry, build an environment more conducive to trade and industry, and increase investment in the economy.
Even as he listed his achievements, Manmohan Singh admitted that much remained to be done to reform India's educational system.
"Many of our schools still lack drinking water facilities, toilets and other necessary infrastructure. There is a need to improve the quality of education.
"To achieve this, it is necessary to lay more emphasis on training of teachers."
The prime minister claimed a reduction in Maoist and terrorist violence but "we have not been successful in preventing Naxal attacks that happen from time to time".
He said the UPA had taken important measures to make governance responsive, transparent and honest.
The Right to Information (RTI) Act had helped expose "irregularities and corruption" and hoped it would lead to further improvements in the way the government functions.
The Lokpal Bill was now in the Rajya Sabha, he said. When it became law, it will "be a major step towards making our political system clean".