For the first time in India's history, leaders from across South Asia have been invited to the inauguration at the president's palace in New Delhi, including the prime minister of arch-rival Pakistan, Nawaz Sharif.
Narendra Modi's Hindu nationalist Bharatiya Janata Party (BJP) and its allies swept India's elections this month, ousting the Nehru-Gandhi dynasty in a seismic political shift that has given his party a mandate for sweeping economic reform.
His day began with a visit to the site of independence hero Mahatma Gandhi's cremation on the banks of the Yamuna river. Sharif and Afghan President Hamid Karzai reached Delhi in the morning, with the ceremony due to begin at 1800 (1230 GMT).
As an act of goodwill following their invitations, Pakistan and Sri Lanka agreed to release hundreds of Indian fishermen jailed for straying into their neighbours' territorial waters.
Some 4,000 guests are expected at the ceremony, making it the biggest swearing-in of an administration since independence. A heavy security operation meant movement was restricted around the centre of the colonial-era capital.
Even before his inauguration, Modi made waves on the global stage, where once he was treated by many with suspicion - and by some as a pariah - for Hindu-Muslim violence that erupted 12 years ago in Gujarat, the western state he ruled.
Modi, 63, has spoken with the presidents of the United States and Russia, and he has become one of only three people that Japanese Prime Minister Shinzo Abe follows on Twitter. The U.S. administration denied Modi a visa in 2005, but President Barack Obama has now invited him to the White House.
The low-caste son of a tea stall-owner, Modi has given India its first parliamentary majority after 25 years of coalition governments, which means he has ample room to advance reforms that started 23 years ago but have stalled in recent years.
Many supporters see him as India's answer to the neo-liberal former U.S. President Ronald Reagan or British leader Margaret Thatcher. One foreign editor has ventured Modi could be so transformative he turns out to be "India's Deng Xiaoping", the leader who set China on its path of spectacular economic growth.
Modi kicked things off on Sunday with an announcement that he would streamline the cabinet, a move to a more centralised system of governing aimed at breaking decision-making bottlenecks widely blamed for dragging down economic growth.
Modi said he would appoint super ministers in charge of several departments to make ministries coordinate better. Arun Jaitley, 61, is the front runner to be named finance minister, party sources said. One of the top corporate lawyers in the country and a close Modi aide, Jaitley served in a previous BJP administration as commerce minister.
The BJP has long advocated a tough stance on neighbour Pakistan, with which India has fought three wars since independence from Britain separated them in 1947, and Modi has been seen as a hardliner on issues of national security.
In that respect, Modi's decision to invite Sharif for his inauguration and bilateral talks came as a surprise and raised hopes for a thaw in relations between the nuclear-armed rivals, particularly frosty since 2008 attacks on the city of Mumbai by Pakistan-based militants.
Vikram Sood, former head of India's external intelligence agency, the Research and Analysis Wing, told Reuters that inviting all the leaders of the South Asian Association for Regional Cooperation (SAARC) was "an astute" diplomatic gesture.
"This augurs well for the region, and an improvement of relations all over the region is possible if these moves are followed by other steps, bilaterally and multilaterally," he said.
India is the biggest South Asian nation, but friendships with neighbours have soured in recent years, allowing China to fill the gap.
China has built a port in Sri Lanka and is involved in upgrading another in Bangladesh, besides military and civil assistance to long-time ally Pakistan, heightening Delhi's anxieties of being boxed in.
"Modi has appreciated the much-neglected fact that foreign policy begins at the nation's borders," wrote foreign policy analyst C. Raja Mohan in the Indian Express. "As a realist, however, Modi should be aware that major breakthroughs are unlikely amid the current flux within Pakistan."