Ronald Reagan today proposed a scaled-down program of economic growth that calls for balancing the federal budget within three years, reducing income tax rates to stimulate investment and increasing the defense budget nearly 6 percent annually.

In a speech warmly applauded by the International Business Council here, Reagan and his program would halt "a downward cycle of progressive economic deterioration." But he acknowledged for the first time that accomplishing this goal would not be easy.

"I am asked, can we do it immediately?" Reagan said. "My answer is no. It took Mr. Carter 3 1/2 years of hard work to get us into this economic mess. It will take time to get us out."

Reagan's plan as outlined today is far more modest than his campaign rhetoric over the last several months implied. It was in part an effort to assure voters that he could cut taxes, balance the budget and boost defense spending as promised without unduly slashing government programs.

Reagan said that, as president, he would reduce federal spending a minimum of 7 percent from projected spending levels over a five-year period. He said his actual goal would be a 10 percent reduction.

Current estimates by the Senate Budget Committee are that the federal budget will rise from $633 billion in fiscal 1981 to $920 billion in fiscal 1985. A Reagan administration budget in fiscal 1985 would be $64 billion below this figure if a 7 percent reduction were achieved and $92 billion less if the 10 percent goal were realized.

The key to the Reagan economic proposal, said adviser Alan Greenspan, is that it would "restore vitality and incentives to the economy" while leaving federal spending as a percentage of the gross national product unchanged. Federal spending currently is 20.6 percent of the gross national product.

"This is an exercise in reasonable budget making," said Greenspan, who served as chairman of the Council of Economic Advisers under President Ford.

Reagan's hold-the-line approach today was a far cry from the rhetoric in a number of his past speeches. On Aug. 28, before the Ohio conference of Teamsters, Reagan said: "When Mr. Carter or Mr. Mondale . . . say they simply cannot balance the budget, provide for the national security and reduce the high tax load on the American people, I say: Stand aside because we can and we will!"

The Reagan proposal today, according to his economic advisers, was deliberately designed to be a sober assessment of U.S. economic issues that promised, as one aide put it, "no free lunch solution."

These are the essential elements of what Reagan proposed:

Reducing government spending, starting with a 2 percent cut in fiscal 1981 that would take $13 billion out of the federal budget. Reagan said he would accomplish this by a manpower freeze and by "appointment to top government positions of men and women who share my economic philosophy." tHe said he would appoint a citizens' task force, as he did when he was governor of California, to seek out new ways of making government more efficient.

Cutting federal income tax rates 10 percent a year over a three-year period, the basic element of legislation proposed by Rep. Jack Kemp (R-N.Y.) and Sen. William Roth (R-Del.). Reagan said he also would propose indexing federal taxes after the 10 percent tax reduction had been achieved to prevent inflation from pushing taxpayers into higher brackets. The Republican presidential nominee also proposed accelerated depreciation for businesses, which he said would stimulate investment and job creation.

Reducing government regulations. "In my administration there should and will be a thorough and systematic review of the thousands of federal regulations that effect the economy," Reagan said.He provided no details.

Changing the nation's monetary policy away from what Reagan called "too much printing press money," under President Carter. Reagan said the Federal Reserve Board "is and should remain independent of the executive branch of government" but that he would make appointments to the board of persons "who share my commitment to restoring the value and stability of the American dollar."

"A fundamental part of my strategy for restoring economic growth is the restoration of confidence," Reagan said. "If our business community is going to invest and build and create new, well-paying jobs, they must have a future free from arbitrary government action. They must have confidence that the economic rules of the game won't be changed suddenly or capriciously."

Under Reagan's plan, defense spending, adjusted for inflation, would increase 5.7 percent a year to about $280 billion. Advisers emphasized that this is not a precise figure and that the actual defense budget in 1985 would be somewhere between the $270 billion projected by the Senate Budget Committee and the $284 billion advocated by the Committee for the Present Danger.

At $280 billion, Greenspan said, the defense budget in 1985 would be 6.1 percent of the estimated gross national product.

Reagan's advisors believe today's speech will protect him from anticipated Carter administration charges that a Reagan administration would drastically cut the federal budget.

In this respect, the Reagan proposals echoed his performance as governor of California. While Reagan was elected on a platform of rolling back the growth of government, and while he did significantly slow the rate of growth, he also presided over the largest tax increases, until that time, in the state's history.