NEW DELHI, May 20: Indian prime minister-designate Dr Manmohan Singh said on Thursday that improving ties with Pakistan was the top-most foreign policy objective of his Congress party-led United Progressive Alliance (UPA).

In his first meeting with the media after he was named as India's next prime minister by President A.P.J. Abdul Kalam the previous day, Dr Singh said he would continue economic reforms but with a human face.

He ruled out privatizing key state-owned oil companies and the announcement had a downward impact on the Mumbai Stock Exchange Index - Sensex. Dr Singh said improving ties with Pakistan was his top priority. "We seek the most friendly relations with our neighbours, more so with Pakistan, than with any other country."

"We must find ways and means 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 thing of the past. We should look to the future with hope. It is not impossible," he declared.

Dr Singh said just as the fall of the Berlin wall was unthinkable some years ago, normal ties between India and Pakistan were wrongly considered unmanageable.

"Who could have imagined some 15 years ago that the Berlin wall would melt? The world saw that what was impossible in international politics became a normal. It will be our effort without sacrificing our national security imperatives to create an environment to move forward and improve our relations with Pakistan on a priority basis."

Dr Singh said both neighbours should put their unfortunate history behind and look at the future with hope. The person who gave him the job had already backed Dr Singh's comments on Thursday.

Congress President Sonia Gandhi's comments earlier this week that peace talks with Pakistan were a priority for her new government had set the stage for Thursday's policy statement.

Adjusting his pro-reform image to his new political mandate, Dr Singh said rural development and poverty alleviation were the top priorities of his government. He pledged to help the poor and foster investment.

Quoting Mahatma Gandhi, Dr Singh said his government's priority would be a war against poverty, ignorance and disease and claimed that the 21st century would belong to India.

The architect of India's economic reforms in the 1990s said that his government would pursue economic reforms with a human face. Speaking on the Ayodhya issue, Dr Singh said that the dispute should be settled in the courts.

Referring to anti-Sikh pogrom in 1984 and the anti-Muslim violence in Gujarat in February 2002, Dr Singh said he would never allow riots to recur anywhere again.

Pledging to build an "environment of peace" among communities, he said the country could not be divided on the basis of religion and race. Dr Singh also said divisive forces were allowed "free play" during the outgoing government's tenure.

"I do not want to begin my career by accusing the previous governments but divisive forces were allowed a free play which I believe is extremely injurious to orderly development," he said.

Dr Singh received felicitations from outgoing prime minister Atal Behari Vajpayee and the BJP, which said it was relieved that Ms Gandhi had declined the prime minister's post.

Speaking about the Jammu and Kashmir issue, Dr Singh maintained that his government would talk to all parties. He seemed to imply that these included the All Parties Hurriyat Conference.

"As far as the J&K policy is concerned, our party is in favour of discussion with all interested groups. We will explore all possible opportunities to bring peace and prosperity to this vital state of the nation," he said.

He said there would be 'no two power centres' in the wake of Congress President Sonia Gandhi refusing the post of prime minister and added that she would remain a "guiding force" for the coalition.

Another impact on India's new foreign policy stemming from Dr Singh's communist-backed UPA coalition was a rare criticism of Israel. A foreign ministry statement, usually soft on the Zionist state throughout the Bharatiya Janata Party rule, said: "We condemn the large-scale demolition of homes in the Rafah Palestinian refugee camp in Gaza and the indiscriminate use of force by the Israeli defence force, which has caused unwarranted loss of innocent civilian life, particularly of women and young children. Such unilateral action must cease immediately."

"We urge an end to the vicious cycle of violence and counter-violence and sincere and meaningful efforts to re-start the peace process in accordance with the relevant UN resolutions and the Quartet road-map," the statement said.

Indian and Pakistan officials, meanwhile, said New Delhi was keen not to delay the proposed talks next week between the two countries on Kashmir and nuclear CBMs.

Dr Singh would be sworn-in on Saturday and the Pakistan team led by Tariq Usman Haider, additional secretary at the foreign ministry's UN cell, was expected to arrive here on Monday. The two-day talks would also include Mr Jalil Abbas Jilani, the point person for India at Pakistan's foreign ministry.