* Indian PM Singh makes veiled swipe at Pakistan
* India vying for influence in Afghan affairs
By Akram Walizada and Amie Ferris-Rotman
KABUL, May 13 (Reuters) - Indian Prime Minister Manmohan Singh, backing Kabul's peace plan to reconcile with Taliban-led insurgents, urged Afghanistan on Friday to shake off outside "coercion", while at the same time seeking to boost India's waning influence.
Singh's strong words to a session of the Afghan parliament come at the end of a two-day visit to Kabul aimed at renewing Indian ties with Afghanistan, where New Delhi has been jockeying for influence to counter historical rival Pakistan.
"It is up to you, as the peoples' representatives, to make decisions about your country's future without outside interference or coercion," Singh told the session, attended by Afghan President Hamid Karzai.
Pakistan, which has gone to war with India three times since 1947, has been vying for a central role in a negotiated settlement in its neighbour Afghanistan's affairs.
Kabul and Islamabad last month agreed to give Pakistan's security establishment a formal role in any peace talks. [ID:nL3E7FJ100]
In moves likely to irritate Pakistan, Singh earlier pledged $500 million for development projects in Afghanistan, taking what he said was the total amount of Indian aid over the next two years to $2 billion.
India is Afghanistan's largest regional donor.
He also tempered India's opposition to a plan by Karzai to reintegrate Taliban fighters and reconcile with some of their leaders. Fighting has dragged on for nearly 10 years in Afghanistan, with violence last year reaching its worst level since the Taliban were toppled by U.S.-backed Afghan forces in late 2001.
"Afghanistan has embarked upon a process of national reconciliation. We wish you well in this enterprise," Singh said. He reiterated New Delhi's first public backing of an Afghan peace plan a day earlier.
India, fearing that reaching out to insurgents could cede more power to Pakistan in the peace process once Western forces leave, was rattled when the United States and NATO agreed to the plan at a summit in Lisbon late last year.
As part of that plan, NATO-led forces will begin a gradual drawdown from July under a transition programme to Afghan responsibility that will end with the departure of all foreign combat troops by the end of 2014.
At home, some pointed out that Singh's mission in Afghanistan carried little weight in the face of Pakistani dominance. It was Singh's first trip since 2005, and came barely more than a week after al Qaeda leader Osama bin Laden was killed by U.S. special forces in Pakistan.
"At the heart of this state of affairs is that India has little or no hard-nosed influence on events in Afghanistan. This reflects geographical reality, the greater stakes of players like Pakistan," wrote India's Hindustan Times paper on Friday.
Singh also said India was ready to "widen our cooperation" in the area of security once NATO completes its planned handover of security responsibilities to the Afghans by the end of 2014. He did not go into detail. (Writing by Amie Ferris-Rotman; Editing by Paul Tait and Alex Richardson)
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