REFILE-UPDATE 4-Indian PM Singh sworn in amid reform hopes
(Refiles to add dropped word in paragraph 9) (For more stories on the election click [ID:nSP437509]
NEW DELHI May 22 (Reuters) - Indian Prime Minister Manmohan Singh was sworn in on Friday for a second five-year term with expectations his strengthened left-of-centre coalition could both reform a slowing economy and help millions of poor.
Singh's Congress party-led coalition has a stronger parliamentary majority than his first administration, meaning the government could last its full five-year term in a region otherwise beset by instability from Pakistan to Sri Lanka.
Unfettered by its former leftist allies, Congress is likely to push reforms such as raising the foreign investment limit in insurance and opening up the pension sector to spur growth in Asia's third-largest economy.
With the fiscal deficit running at the highest since the early 1990s, the coalition will have to decide whether to spend more on social programmes that helped Congress win the election.
India face challenges to upgrade its creaky infrastructure, including crowded airports and backlogged ports, to help the trillion-dollar economy compete with the likes of China.
Singh will also have to deal with nuclear rival Pakistan after tense relations following the militant attacks on the country's financial capital, Mumbai, last year.
For a factbox on the main challenges facing Singh click on [ID:nISL493029]
President Pratibha Patil administered the oath of office to Singh, 76, at the red sandstone presidential palace, watched by relatives and leaders of his party and its allies.
Nineteen other members of Singh's cabinet, including Congress stalwart Pranab Mukherjee, a party old-timer who is tipped to be the new finance minister, were sworn in. Portfolios of the ministers have not yet been allocated.
The average age of the ministers is 66, signalling that the government will be run by an old guard with less appetite for a radical re-think of policy.
Rahul Gandhi, the fourth generation member of the Gandhi-Nehru dynasty, was not among the ministers sworn in, despite reports that the heir apparent, seen as the architect of the party's resurgence, could be given a ministerial job.
(For a factbox on possible ministers click on [ID:nDEL116805])
The soft-spoken Singh, who wore his trademark light -blue turban, is only the second prime minister after Jawaharlal Nehru to be elected for a second full term.
Unlike Singh's first term, the new coalition is assured of the support of more than 300 members of the lower house of parliament, well above the halfway mark of 272 required to rule.
The DMK party, a southern ally of Congress, has said it will not join the government because of differences over ministerial positions, a sign that it will not all be political plain-sailing for the now-confident ruling party.
Stocks surged earlier this week as investors welcomed Singh's strong mandate, which raised expectations for aggressive economic reforms at a time when growth has slowed to 6.5 percent.
"There is an opportunity for change with this mandate. If in the first 100 days I don't see any signs of reforms being done or a timeline I will feel very concerned," Amit Mitra, head of India's industry lobby group, told Reuters.
Singh's immediate foreign policy challenge will be to manage ties with Pakistan.
While there may not be any major peace moves, Singh could make a limited opening to Pakistan now he no longer needs to worry about a weakened Hindu nationalist opposition criticising him as being soft on India's nuclear rival, analysts say.
Singh has previously ruled out holding talks unless Pakistan takes action against the Lashkar-e-Taiba militants accused of involvement in the Mumbai attack.
Pakistani President Asif Ali Zardari said his country was ready to work with India to resolve all outstanding issues.
"The outcome (of the elections) is a manifestation of the trust reposed by the people of India in your wise and inspiring leadership," Zardari said in a message of congratulation to Sonia Gandhi, the head of the Congress party. (Additional reporting by Matthias Williams; Editing by John Chalmers and Alistair Scrutton)