Mumbai: The government is considering a proposal for negotiating an investment pact with the United States as part of an ongoing effort to expand bilateral economic ties.

Stating this, Gretchen Hamel, a spokeswoman for the US trade representative's office, said there was "definitive interest" on both sides in negotiating an investment pact.

She said the talks currently are exploratory and the two sides would hold another round of talks before moving ahead.

India and the US had discussed various ideas for expanding economic ties at the fifth ministerial-level meeting of the US-India Trade Policy Forum in Chicago.

These included a bilateral investment treaty by the end of 2008, while at the same time pursuing other longer-term initiatives to "achieve the freest possible environment for trade, investment and technology transfer."

US direct investment in India, which totalled about $8.5 billion in 2005, was mainly in the information technology, manufacturing and banking sectors.

Although most sectors of the Indian economy are open to foreign investment, US investors feel many restrictions remain in sensitive sectors such as agriculture, retail trading, railways and real estate.

A bilateral investment treaty is expected to better establish terms and conditions governing investment flows, it is felt.

Trade and investment ties were discussed by commerce and industry minister Kamal Nath during talks with US trade representative Susan C. Schwab on February 19 at the fifth ministerial-level meeting of the US-India Trade Policy Forum (TPF) in Chicago.

Kamal Nath and Schwab also "discussed the Doha negotiations, agreeing that the US and India share a commitment to conclude a successful Doha Round in 2008?, a statement issued by the USTR and Indian embassy in Washington Friday said.