The two countries are mastering energy-efficient technologies, implementing cheap and environmentally-responsible transportation systems, and adopting new water harvesting techniques as models for a sustainable economy, says the annual report of the US-based Worldwatch Institute.

"China and India are positioned to leapfrog today's industrial powers and become world leaders in sustainable energy and agriculture within a decade," the president of the environmental research group, Christopher Flavin, predicted at a news conference.

"We were encouraged to find that a growing number of opinion leaders in China and India now recognize that the resource-intensive model for economic growth can't work in the 21st century," he said.

China's world leading solar-industry already provides water heating for 35 million buildings, and India's pioneering use of rainwater harvesting brings clean water to tens of thousands of homes, according to the 244-page report.

Zjeng Bijian, head of China Economic Reform, an academic group, called in the report for "a new path of industrialization based on technology, low consumption of resources, low environmental pollution and the optimal allocation of human resources."

Zjeng holds senior posts in academic and party organizations in China and his non-governmental group has drafted key reports for five Chinese national party congresses.

Sunita Narain of India's Center for Science and Environment said in the report that "the South -- India, China and all their neighbours -- has no choice but to reinvent the development trajectory.

A country heavily dependent on coal, China's ambitious renewable energy law enforced this month stands a good chance of jumpstarting windpower, biofuels, and other new energy options, the report said.

The world's most populated nation has already successfully pioneered the use of small wind turbines, hydro generators, and biogas plants for power generation in remote rural areas.

China is world leader not only in solar hot water technology but also in producing super-efficient compact fluorescent light bulbs.

It is also aiming for an ingenious bus rapid transit system that combines the speed of a subway with the affordability of a bus. Trials have been held and bus ridership has jumped five fold during rush hour, the report said.

Electric bicycles are also becoming popular, with domestic sales having reportedly trebled the projected sales of cars.

India, which has a long tradition of promoting renewable energy, recently built the world's fourth largest wind power industry and the largest among developing economies.

It wants to increase renewable energy's share of its power from five percent to 20-25 percent.

"Armed with creative solutions to critical problems and with evidence of the futility of current development paths and the superiority of the alternatives, Chinese and Indian pioneers are providing models for a new and sustainable economy," the report said.

This is seen as welcome relief as China and India -- with 40 percent of the world's people between them -- are set to join already industrialized economies as major consumers of resources and polluters of local and global ecosystems.

In fact, rapid economic growth has already taken a toll on the environment in the two countries.

China, for example, has just eight percent of the world's fresh water to meet the needs of 22 percent of the world's population, the report said.

In India, it added, only about 10 percent of sewage is treated, and both urban and industrial pollutants are commonly dumped directly into waterways.

"Rising demand for energy, food and raw materials by 2.5 billion Chinese and Indians is already having ripple effects worldwide," Flavin said.

While China and India have often been blamed for driving up the price of oil and other commodities, Flavin said one of the most striking conclusions of his group's analysis was "how dominant the US still is when it comes to resources and pollution."

With oil, for example, the United States imports nearly four times as much as China, despite having only one fourth as many people.

"Americans wondering why the price of oil is so high need only to look in the mirror," Flavin said, pointing out that "a new economic path is at least as crucial for the United States as it is for China or India."

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