(Updates with more violence)

By Simon Denyer

NEW DELHI, Aug 15 (Reuters) - Indian Prime Minister Manmohan Singh marked the 60th anniversary of independence from British rule by urging the country to work harder to free itself from the shackles of poverty, ignorance and disease.

"India cannot become a nation with islands of high growth and vast areas untouched by development, where the benefits of growth accrue only to a few," he said on Wednesday from the ramparts of New Delhi's historic Red Fort behind a bulletproof glass screen.

"We have moved forward in the many battles against poverty, ignorance and disease. But can we say we have won the war?," he told a crowd of officials and diplomats as well as children dressed in the white, orange and green of the Indian flag.

India is one of the world's fastest-growing economies, but has some of the sharpest inequalities in the world, with hundreds of millions of poor surviving on a fraction of a dollar a day.

Sharpshooters were stationed on nearby buildings as Singh spoke, while troops and armed police guarded roads and key buildings around the country on a day traditionally marked by violent attacks by separatist militants or Maoist rebels.

Earlier, Singh laid wreaths at memorials commemorating the leader of India's freedom movement, Mahatma Gandhi, as well as its first prime minister, Jawaharlal Nehru, and his daughter, assassinated former Prime Minister Indira Gandhi.

The prime minister, dressed in his trademark light blue turban, then proceeded to the 17th century Mughal-era sandstone fort where he unfurled the national flag to a 21-gun salute.

"NATIONAL SHAME"

Singh promised fresh investment of 250 billion rupees ($6.2 billion) in agriculture, which still employs more than half of India's population, and said he wanted a "revolution in modern education" in a country where one in three people are illiterate.

"The problem of malnutrition is a national shame," he added. "I appeal to the nation to resolve and work hard to eradicate malnutrition within five years."

Despite growth rates of around 8 percent in recent years, around 46 percent of children under three are undernourished, UNICEF says, a higher rate than in sub-Saharan Africa.

He also vowed renewed efforts to promote industrialisation and build "first-rate infrastructure", adding the transition from an agrarian to an industrial economy was a difficult one.

After farmers' protests this year, Singh said the government needed to ensure that those who lost their land to make way for factories did not lose their livelihoods. Urban planning also needed to be improved in India's ballooning cities.

"We are a young nation," he said. "Once unleashed, the energy of our youth will drive India onto a new growth path.

"However we must not be overconfident. We have a long march ahead. We need at least a decade of hard work and of sustained growth to realise our dreams."

The celebrations were washed out by heavy rains in the eastern state of Bihar, which has become a byword for poverty and underdevelopment. Devastating monsoon-related flooding has killed 277 people in the state this year and affected 14 million more.

In India's remote northeast, suspected separatist rebels threw a grenade at a police camp in the oil- and tea-rich state of Assam, wounding five people including two policemen, just minutes before Independence Day celebrations were to begin.

Another explosion took place at a market in Gauripur town in the state's Dhubri district, but as the markets were closed, no casualties were reported. A bomb planted under an electric transformer in the same district was recovered and defused.

Police said they suspected the United Liberation Front of Asom (ULFA) was behind the attacks. ULFA has already been blamed for killing 30 people in the past week, including women and children, all of them Hindi-speaking settlers.

In eastern India, Maoist insurgents hoisted black flags in remote villages to protest against the celebrations.

In the Kashmir Valley, scene of a violent 17-year insurgency against Indian rule, shops were closed and streets deserted after Muslim separatist groups called for a general strike and labelled the anniversary a "black day".

Singh said a special effort was needed to bring prosperity to less developed regions like the northeast and Kashmir.

Kashmir is also a bone of contention between India and Pakistan. The South Asian nuclear-armed neighbours claim Kashmir in full but rule it in parts, and have fought two wars over it.

Pakistan celebrated its own 60th Independence Day on Tuesday with flag-raising ceremonies and fireworks, but political troubles for its pro-U.S. president and fears of militant violence kept festivities subdued in several cities. (Additional reporting by Biswajyoti Das in Guwahati, Bappa Majumdar in Kolkata and Sheikh Mushtaq in Srinagar)

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