Singh, who will be the first non-Hindu prime minister of the world's largest democracy, said he had showed the president proof of support for his Congress party-led coalition.

"I am happy to inform the nation that the president has invited me to form the next government," the 71-year-old economics reform architect told reporters at the presidential palace.

Flanked by Sonia Gandhi, the woman who stepped aside for him, Singh pledged to continue the economic reforms he kicked off more than a decade ago and make "the 21st century... the Indian century".

"We have always said that economic reforms, with emphasis on the human element, will continue," a smiling, blue-turbaned Singh told reporters after meeting President Abdul Kalam to claim power following Congress's surprise election win last week.

Kalam's approval of a Congress-led coalition is considered a formality because the party is assured of the support of more than 320 members of the new 545-seat parliament.

Italian-born Gandhi had turned down the post of prime minister Tuesday despite appeals by leaders and workers of her party, citing her "inner voice".

"With madam's guidance and support, I am sure we are going to make the future happy," Singh said.

The economist was yesterday evening elected by the Congress party's 145-member parliamentary caucus as their leader, making him automatic candidate for the prime minister's post.

The unassuming Singh, who launched India's free market reforms more than a decade ago, became front-runner to lead the world's biggest democracy after Gandhi, widow of assassinated former prime minister Rajiv Gandhi, stepped aside.

He will be India's first Sikh prime minister. Dozens of Sikh men sporting the turbans and beards required by their faith danced with joy outside Singh's home on news of the first prime minister from their community, which forms about two percent of the billion-plus population.

RESIGNATION AND PROTEST
Yesterday, Congress bosses quit their party posts and trooped to Gandhi's home in a last-ditch bid to persuade her to accept the job. But Gandhi, who the Bharatiya Janata Party (BJP) says should not hold the top job because of her foreign origin, did not budge.

Frenzied Congressmen continued to stage sit-ins outside Gandhi's 10 Janpath residence urging her to reverse her decision.

Many of Congress, who spent the entire night hoping against hope that Gandhi may agree to become prime minister, were raising slogans "either it is Sonia or nobody".

Party workers blocked trains and -- on a vigil outside Gandhi's New Delhi home -- smashed windowpanes in the adjacent party office to express anger at her refusal.

The Gandhi family's political stronghold in northern India is on strike in a bid to persuade Gandhi to change her mind.

Backers of the Congress took to the streets of Amethi in Uttar Pradesh state, chanting slogans against the defeated BJP, which had refused to accept a foreign-born premier.

But Gandhi's Italian relatives have welcomed her decision. "She took the right decision," Gandhi's aunt Dorina Maino told Italy's Ansa news agency. "It's better to stay out of politics."

The main stock index closed 2.65 percent higher, crossing the psychological 5,000 level, on hopes Singh would lead Asia's third largest economy.

The Congress received a further boost after a southern regional group said it would join its coalition government, instead of simply supporting it from the outside.

"Yes, we will," Dravida Munnetra Kazagham leader M Karunanidhi said when asked if his party would take cabinet posts.

Scholarly Singh commands respect for his integrity and intellect. But he will need sharp political skills to manage party leaders -- who have looked only to the Nehru-Gandhi dynasty to lead -- and disparate allies with their competing demands.

"The father of India's reform programme rising to the prime ministership would be very positive from the standpoint of the market," said PK Basu, head of Robust Economic Analysis.

"But I would caution against excessive euphoria since Dr Singh as an economic reformer is well regarded, but his abilities as a political manager are untested."

The Communist Party of India (Marxist), which has pledged support to a Congress-led coalition, said the overriding concern was to stop Hindu nationalists from returning to power and it would support even Singh.

"He is one of the most decent persons, a knowledgeable economist, and I will opt for him any time over any person in the Bharatiya Janata Party," said communist Somnath Chatterjee.

Gandhi would have been India's first foreign-born prime minister and the fourth from the Nehru-Gandhi clan after founding leader Jawaharlal Nehru, his daughter Indira and her son Rajiv. The constitution does not ban foreign-born individuals from the office.

(Reuters and AFP)