"The expanded cooperation launched today is an important milestone in transforming the relationship between the United States and India," Bush said in a written statement during his visit to Mexico on Monday.

"We are working together to promote global peace and prosperity. We are partners in the war on terrorism and we are partners in controlling the proliferation of weapons of mass destruction and the means to deliver them," Bush added.

The announcement comes in the wake of a major breakthrough between India and Pakistan who have agreed to open talks on settling their long-standing dispute over Kashmir.

The US has tried to maintain good relations with both India and Pakistan, but has to find a delicate balance to avoid antagonising one side as it improves cooperation with the other.

Placating Pakistan

However, a US administration official denied that the agreement was a "reward" for India and said there was no link between the announcement and the peace moves.

India and Pakistan have agreed
to hold bilateral talks

"This will clearly be helpful with India but will be very disturbing to Pakistan," said Michael Krepon of the The Henry L Stimson Center think tank, adding that US-India missile defence cooperation is a major concern for Islamabad.

"Pakistan will now be asking, 'What's in it for us?'" Krepon added.

The administration official said the US was "offering similar dialogue" to Pakistan.

Bush also said India and the US would step up cooperation on civilian space programmes and trade in high technology.

The initiatives expand on a strategic partnership with India outlined in November 2001 and aim in part to combat the spread of unconventional weapons, he said.

"It (the expanded cooperation) will include expanded engagement on nuclear regulatory and safety issues and missile defence, ways to enhance cooperation in peaceful uses of space technology, and steps to create the appropriate environment for successful high technology commerce," Bush said.