Prime Minister Manmohan Singh has said India hopes to conclude a free trade agreement with Japan by the end of the year, a step that is expected to help significantly expand bilateral trade and investment.
India will also be interested in forging more civil nuclear trade deals with other countries, including Japan, he said.
"We are very keen that before the year is out we should have an agreement on a comprehensive economic partnership," Singh said in an interview to a Japanese newspaper Yomiuri Shimbun.
The two countries had earlier failed to finalise a trade deal by mid-2008 or to achieve visible progress in time to sign it during a three-day visit by Singh to Japan which started on Tuesday, the paper said.
In 2007, India was Japan's 27th largest trade partner, and the share of Japan's trade with India in its total foreign trade was merely 0.8 per cent.
Speaking to Japanese journalists in New Delhi before his departure, the prime minister said that fast-growing India and Asia's largest economy would both benefit from a free trade agreement.
"There are great complementarities between the economies of the two countries," he said, expressing strong hopes for expansion in trade and investment with the conclusion of the economic partnership agreement.
Talks between the two countries have been bogged down over how much to reduce tariffs and whether Japan will ease its tight regulations to allow Indian generic drugs, the newspaper said.
Regarding the global financial crisis, Singh said India was 'relatively less affected because our banks are well catalysed and have minimum exposure to the type of assets which have given rise to problems.'
Indian economy, the prime minister said, 'can maintain a growth rate of 7.5 to 8 per cent in the current fiscal year'.
Another Japanese newspaper Asahi Shimbun quoted Singh as saying that India wanted to forge more nuclear deals with other countries, including Japan.
But, Masato Ohtaka, a Japanese foreign ministry official was quoted by the paper as saying Japan is unlikely to agree to such a proposal.
Instead, the Japanese government would ask India to respect Japan's public sensitivity to nuclear issues because of the atomic bombing of the Hiroshima and Nagasaki during World War II, the official said.
The newspapers said that the two prime ministers are also likely to sign a loan agreement to fund a 1,468-kilometre rail freight line between New Delhi and Mumbai.
The loan is expected to the tone of $4.5 billion, the biggest-ever amount Tokyo has provided for a project overseas.
India earlier this month signed a landmark deal with the US that gives New Delhi access to nuclear technology after being shut out for decades.