Bangladesh and India have sealed a historic land pact to swap territories, which will finally allow tens of thousands of people living in border enclaves to choose their nationality after decades of stateless limbo.

The foreign secretaries of the two nations on Saturday signed a protocol and exchanged instruments of ratification to make operational the Land Boundary Agreement (LBA) in the presence of Narendra Modi, the visiting Indian prime minister, and his Bangladeshi counterpart, Sheikh Hasina.

The two leaders watched as officials of the two nations signed a number of agreements and India announced a "$2bn line of credit" to Bangladesh in an effort to deepen bilateral ties.

Modi's first trip to Dhaka since his election win last May has been dominated by the deal to permanently fix the contours of a border which stretches about 4,000km along India's eastern flank.

The agreement removes an irritant in relations between India and Bangladesh since the 1971 war of secession [Reuters]

While Delhi's relations with China and Pakistan continue to be dogged by border disputes, the LBA's ratification removes an irritant between the two countries since Bangladesh's 1971 war of secession from Pakistan.

An agreement on the ownership of 162 enclaves - essentially islands of land resulting from ownership arrangements made centuries ago by local princes - had proved elusive in the decades since.

Bangladesh actually endorsed the deal in 1974 but it was only last month that India's parliament gave its approval, setting the stage for the joint ratification ceremony between Modi and Hasina.

Under the agreement, the countries will exchange territories, with 111 enclaves being transferred to Bangladesh and 51 to India.

People living in the enclaves will be allowed to choose to live in India or Bangladesh, with the option of being granted citizenship in the newly designated territories, and the enclaves would effectively cease to exist.

Around 50,000 people who are thought to live in the landlocked islands lack many basic services such as schools, clinics or utility services because they are cut off from their national governments.

Berlin Wall analogy

Modi, who was received by Hasina at the airport, has compared the agreement to the dismantling of the Berlin Wall.

"We've resolved a question that has lingered since independence. Our two nations have a settled boundary. It will make our borders more secure and people's lives more stable," Modi said after the signing of the deals.

Hasina has been similarly effusive, terming Modi's visit a "historic moment".

She said she was "extremely happy" that with the land pact "a 68-year-old humanitarian issue comes to a peaceful end".

The two leaders also inaugurated bus services connecting the Bangladeshi capital with four eastern India cities, and Dhaka declared a special economic zone near a southern port exclusively for Indian investors.

Wary of China's growing interest in India's backyard, Modi has been keen to play a greater leadership role in South Asia since coming to power.

Just an hour after Modi's arrival, Reliance Power and Adani, two big Indian energy companies, signed outline agreements with Bangladesh's state-run electricity agency to invest $5bn in the country's power sector.

But there was no breakthrough in a dispute about the sharing of water from the Teesta river which flows through both nations.

Modi, however, struck an optimistic note.

"We have shown political resolve and mutual goodwill with the Land Boundary Agreement," he said.

"I am confident that with the support of state governments in India, we can reach a fair solution on Teesta and Feni Rivers."

Source: Agencies