Manmohan Singh, the Oxbridge-educated economist who is to become India's next Prime Minister, sought to reassure the nation today that he would work to restore harmony between religions and with its neighbour, Pakistan.

Dr Singh also tried to reassure nervous investors that the process of economic reform that he started in 1991, and which was pursued vigorously by the outgoing Bharatiya Janata Party (BJP), would continue.

But shares fell after he indicated that the programme of privatising state industries could be delayed and that his government would not privatise the state-run banks or the Oil and Natural Gas Company.

President Abdul Kalam invited Dr Singh to form a government last night after Sonia Gandhi rejected further passionate entreaties from across the nation that she accept the job. The Congress party's MPs then voted unanimously for Dr Singh to be their leader.

Dr Singh, who will be India's first Sikh leader, said that he wanted to push forward dialogue with Pakistan and hold talks with all parties over Kashmir. "We seek the most friendly relations with our neighbours, more so with Pakistan than with any other.

"We must find the means and ways to resolve all outstanding problems that have been a source of friction and the unfortunate history of our relations with Pakistan. It is our sincere hope that that should become a thing of the past," he said.

Dr Singh also called for tolerance between religions. "Unity and communal harmony are a priority," he said.

The BJP came to power promising to create a Hindu nation and was widely accused of ignoring, and even stoking, anti-Muslim riots in 2002 in the western state of Gujarat.

Wearing a white Nehru-collar shirt and a light blue traditional Sikh turban, Dr Singh said: "Reforms with a human face will be pursued", adding that those reforms must not leave behind farmers, the rural poor and minority ethnic groups that voted in such large numbers to oust the previous Government.

"The war against poverty and disease has to be carried on relentlessly and I pledge our government to remain steadfast in our commitment," he said.

"In the words of Mahatma [Gandhi], to build an India free from the fear of war, want and exploitation."

Dr Singh said that his swearing-in ceremony before Parliament would probably be on Saturday, the day after a commemoration of the assassination of Rajiv Gandhi, the former Prime Minister and husband of Mrs Gandhi.

Her decision not to accept the role of Prime Minister is thought to have been partly informed by her fears that she could also become a target for assassination.

Dr Singh, 71, who as Finance Minister in the early 1990s was an architect of India's economic regeneration.