By Elizabeth Roche

NEW DELHI, May 23, 2009 (AFP) - Indian Prime Minister Manmohan Singh distributed key cabinet portfolios on Saturday after the Congress party's resounding victory in national elections.

One of the big posts was for external affairs minister to manage foreign policy and in particular relations with neighbouring Pakistan, which have been fraught since a militant attack on Mumbai last year that left 166 dead.

"We would like to live in peace with our neighbour," said the incoming Somanahalli Mallaiah Krishna, 77, former chief minister of southern Karnataka state and party veteran, but a new face to the cabinet.

Krishna said New Delhi was ready to extend "the hand of friendship" to Pakistan as long as Islamabad moved to dismantle Islamic militant groups based on its soil.

India blamed November's attack on Pakistan-based militant organisation Lashkar-e-Taiba (LeT).

Another key appointment was outgoing foreign minister Pranab Mukherjee, 73, to the finance ministry to steer the revival of the economy, which has slowed as a result of the global financial crisis after years of staggering growth.

Mukherjee is widely regarded as one of India's canniest politicians. "Efforts will be made to insulate the economy from the adverse impact of financial meltdown," he told reporters.

Frequently described by colleagues as "Mr. Reliable," Mukherjee has been a regular face in successive Congress governments since 1973.

Palaniappan Chidambaram, seen as having overhauled India's security in the wake of the Mumbai attacks, will continue to head the home ministry.

The 63-year-old is known for his sharp mind and efficiency.

"He inspires a lot of confidence as home minister," said Vinod Mehta, editor of the weekly Outlook magazine.

A.K. Anthony will retain charge of the defence ministry, said a government statement, which added the new parliament would convene on June 1.

Sharad Pawar will keep the agricultural ministry while Mamata Banerjee will serve as railway minister.

Both Pawar and Banerjee are key regional allies in the Congress-led coalition which won 262 seats in the 543-member national parliament, just 10 short of the 272 needed for a working majority.

"Portfolios of other ministers will be announced later," a government spokesman said without elaborating.

Congress had campaigned hard on a poverty-alleviation platform for India's rural millions, and voters also responded to the image of 76-year-old Singh, an esteemed economist, as a steady, pragmatic leader capable of steering the country through the financial downturn.

The alliance quickly garnered pledges of support from independents and others to take its voting strength to 322.

But a row over cabinet positions between the Congress and a key southern coalition ally, the DMK, resulted in Singh finalising a shorter list of ministers, with more expected to be sworn in next week.