Addressing a joint session of the Afghan Parliament, Singh said India and Afghanistan face similar development challenges.
"India is ready to partner the Afghan people as they rebuild their country in accordance with their own priorities and national circumstances," he said. "Many of Afghanistan's priorities are also our priorities. Many of your problems are also our problems."
Singh said the people of India feel privileged to see their development cooperation receive such a warm welcome in Afghanistan.
"Nothing would give us greater satisfaction than to see Indian resources being utilised for more roads, more electricity, more schools, more hospitals or more community projects - activities that directly benefit the common Afghan people," he said.
"We will increase development outlays towards capacity building and skill development," the Prime Minister said in his address, heard with rapt attention by Afghan President Hamid Karzai.
He said the government will help through more scholarships for Afghan students for studying in India, institution building efforts, social development and higher investment in the health sector by way of a medical package.
India will provide buses for Kabul and other municipalities in Afghanistan.
Singh said India plans to upgrade the agricultural department at the Kabul University to an agricultural university, donate tractors to farmers and give scholarships for the study of agricultural sciences.
He said India will significantly enhance its commitment for the Small Development Projects Scheme across Afghan provinces to further facilitate development at the grassroots with the involvement of local communities.
The Prime Minister also unveiled a plan to help in the preservation and revival of Afghanistan's archaeological and cultural heritage and restoration of the historic Stor Palace in Kabul.
"The total outlay on these and other additional initiatives that we will take in consultation with the government of Afghanistan in the next few years will amount to 500 million US dollars. This will take our total commitment of assistance to around 2 billion US dollars," Singh said.
India is the sixth largest donor to Afghanistan, which is trying to rebuild the war-ravaged nation after suffering from Taliban-led militancy.