"So we have a problem, there is no doubt," Singh lamented in an interview with a publication of McKinsey and Co, a leading global management consultancy.
"Extreme rigidities in the labour market, inflexibility of the labour market, is not consistent in our achieving our goals in a world where demand conditions are changing so fast, technological conditions are changing so fast.
"But there are limitations for the time being. We don't have a broad-based consensus in our coalition for me to assert that I can move forward in a big way," he told the McKinsey Quarterly released in Washington on Wednesday.
Singh said, however, that he had not given up on efforts to convince his Communist-backed coalition partners on the need for "credible action" on the labour front as well as stepped up privatisation of enterprises.
"I have full confidence in the patriotism of our left colleagues to believe that in the final analysis of what is good for India, they will also be on board," the Indian prime minister said.
A World Bank study released earlier this year rated India as among countries with the most rigid labour laws, which is affecting the heavily populated nation's competitiveness and attractivess to foreign investments.
The Indian PM wants communist
partners to take credible action
Singh, an economist by training who took over the helm in May last year as the country's first Sikh prime minister, said privatisation in India had stalled because of opposition from his communist coalition partners.
"But I must confess to you that in the prevailing milieu, the thinking in our coalition is that for enterprises that are doing well under competitive conditions, we must have special justification to prove to our coalition colleagues that there is need for privatisation," he told the journal.
Singh said: "We are a coalition government, and that limits our options in some ways. Privatisation happens to be one such area. As somebody said, a politician before he can become a statesman has to remain in office long enough. So we have to make those compromises."
With regard to retail trade, he said he was convinced he could work out a fair package for entry of foreign enterprises into the sector without hurting small shopkeepers but creating greater employment.
"We have to carry conviction with our political colleagues. I am confident that over a period of time we can do that," he said, adding that in the next four or five months "I propose to engage myself in this task".