US export licensing policies will also be eased to expand bilateral cooperation in commercial space programs, officials said after talks in Washington between Indian Foreign Secretary Shyam Saran and US Undersecretary of State for political affairs Marc Grossman.

A joint statement described the agreement, ahead of talks between Indian Prime Minister Manmohan Singh and US President George W. Bush on Tuesday, as "major progress."

"What this shows is a growing relationship, both in terms of the number of issues we're dealing with, the importance of the issues and the strength of the cooperation," US State Department deputy spokesman Adam Ereli told reporters.

The deal was the first phase under the "Next Steps In Strategic Partnership With India" agreed in January between President Bush and Singh's predecesor Atal Behari Vajpayee.

Officials said the agreement Friday marked a major milestone in Indian efforts to break out of the isolation from international high-technology after US lifted sanctions slapped on India's nuclear and space programmes following New Delhi's nuclear test blasts in 1998.

The sanctions resulted in a freeze on exchanges in nuclear and other high-tech sectors such as "dual-use technology" which finds applications in both civilian and military use.

"Implementation of the (agreement) will lead to significant economic benefits for both countries and improve regional and global security," the statement said.

In January, the United States and India agreed to expand cooperation in three specific areas: civilian nuclear activities, civilian space programs, and high-technology trade.

In addition, they agreed to expand dialogue on missile defense.

The two governments have been locked in talks since then over India's implementation of measures to address proliferation concerns and to ensure compliance with US export controls, officials said.

"These efforts have enabled the United States to make modifications to US export licensing policies that will foster cooperation in commercial space programs and permit certain exports to power plants at safeguarded nuclear facilities," the statement said.

Among the steps taken by the United States was the removal of the Indian Space Research Organization (ISRO) headquarters from a so-called "entity list" of the Department of Commerce.

They are fully consistent with US government nonproliferation laws, obligations, and objectives, the statement said.

Officials said India had to give assurances that technologies it received from the United States did not fall into the hands of "rogue states."

"It's nothing like iron clad guarantees," Indian Foreign Secretary Saran said of the agreement. The two sides would be involved in "a phased way of cooperation," he said.

Indian Prime Minister Singh, who took office on May 22, will meet Bush for the first time in New York next week on the sidelines of the UN General Assembly.

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