India will consider setting up special economic zones to attract Japanese investment in the country, Union commerce and industry minister Kamal Nath said on Thursday. The decision followed two days of talks with his Japanese counterpart Toshihiro Nikai on the sidelines of a World Economic Forum on East Asia in Tokyo.

Talks are under way to set up a "Japanese industrial cluster, like a Japanese city" in Haryana in northern India, where employees of Japanese companies and their families can receive facilities for education, medical treatment and entertainment, Nath said.

Japan will also back a "one village, one product" campaign in Madhya Pradesh to market specialty goods made by local businesses. Japan and India will also hold reciprocal fashion shows to promote their textile industries.

The two also proposed an action plan to further activate bilateral economic cooperation by promoting investments by Japan''s small and medium enterprises in India.

The two countries will expand cooperation in the fields of environment and energy conservation through technology tie-ups with local firms. While this will help "internationalise technologies of Japan''s small and medium-sized enterprises", Nath said Japan''s advanced technological innovation and workforce "can be synergised into a win-win situation for both countries".

Japan and India will hold the first seminar on energy conservation in October or November in New Delhi and the second one in Japan next year.

"Large Japanese companies have known India, been in India for a long time," Nath said. "But the small and medium-sized enterprises which are a repository of technology and innovation in Japan, we are looking at the Japanese government facilitating them, the Indian government facilitating them to invest in India."

Under the plan, Japan''s Ministry of Economy, Trade and Industry will launch a service called "India New Window" to offer information to Japanese firms interested in doing business in India. The government-supported Japan External Trade Organisation (JETRO) will also open a third office in India next month, in Bangalore, like the ones in New Delhi and Mumbai.

JETRO will also have a business support centre in New Delhi with support from the Japan Finance Corp for Small and Medium Enterprise.

The two countries will exchange lists of each other''s companies to promote business tie-ups and technological cooperation.

Japan is already the fourth-largest foreign direct investor in India and the largest institutional investor. Some 328 Japanese firms are currently operating in India. About 65 per cent of Japanese investment in the country is in automobiles, chemicals and electronics.