"We are keen to have friendly relations with all our neighbours, more so with Pakistan," he told an unscheduled news conference, his first since being appointed the premier Wednesday night.

He said India favoured talks with Pakistan to resolve all outstanding problems between the two countries so that "friction becomes a thing of the past."

"We should look to the future with hope. Who could think that the Berlin wall would collapse one day? If that can happen, why can't it happen in our case," said the 71-year-old architect of Indian economic reforms who is to be sworn as the prime minister of the world's largest democracy tomorrow.

Pakistan welcomed Singh's comments and said they were positive and constructive, Reuters reports.

Nuclear-armed India and Pakistan were on the brink of a fourth war in 2002 -- over their decades-old dispute over Kashmir -- but ties have warmed after outgoing Prime Minister Atal Behari Vajpayee last year launched a fresh bid to make peace.

Asked about his stand on resolving the vexed Ayodhya dispute, Singh said: "We want the law of land should prevail. However, if serious negotiations are on among the contesting parties and a sensible agreement is reached that has the sanction of the court -- that can also be explored."

He said his government would never allow a repeat of what had happened in Gujarat in 2002 or in some parts of the country in 1984, an unnamed but obvious reference to communal riots in the western Indian state and anti-Sikh riots in Delhi after the assassination of Prime Minister Indira Gandhi. Singh himself is a Sikh.

Singh voiced concern over the functioning of "judicial system" in Gujarat but parried a question if his government would dismiss the BJP government in the state and impose federal rule there.

"Functioning of judicial system in Gujarat, inordinate delay in court cases, these are all areas of concern ... We will pay adequate attention to all these issues," he added.

Asked if his government would impose federal rule in Gujarat in the wake of Congress' criticism that rule of law did not prevail in the state, he said, "This is too serious a matter to discuss at a press conference."

"Relations between the Centre and the states are too delicate an issue to discuss like this," Singh said.

The Indian Supreme Court recently transferred trial of a Gujarat riot case outside the state.

Singh, India's first prime minister from a minority community, accused the outgoing BJP-led government of giving a "free play" to divisive forces and said the country cannot be allowed to be divided along religious or racial lines.

Singh said his government would go for economic reforms with a human face with stress on the poor, villages and agriculture.

Singh laid out his vision for his new government yesterday, promising to balance rising living standards for India's billion people with promoting business and investment.

"The priority... will be to do everything needed to wage the battle against poverty," he said.

He said his government would not pursue privatisation as a matter of ideology but keeping in mind national interests. He ruled privatisation of public sector undertaking in strategic areas like Gas Authority of India and Oil and Natural Gas Corporation.

(Reuters material was used in this report)