India-Japan free trade pact by year-end: PM

India hopes to conclude a free trade agreement with Japan by the end of this year, prime minister Manmohan Singh who is on a visit to Japan said as he arrived in Tokyo for the Indo-Japanese strategic talks.

The prime minister thanked Japan for backing the India-specific waiver at the meeting of the nuclear suppliers' group and called on Japan to invest in India's nuclear energy market.

Speaking to Japanese journalists before his departure to Japan, the prime minister had said that both India and Japan would both benefit from a free trade agreement. The two countries, however, failed to meet the goal of reaching a trade deal by mid-2008.

"We are very keen that before the year is out we should have an agreement on a comprehensive economic partnership," Singh said in the interview.

"There are great complementarities between the economies of the two countries," Singh said.

FTA talks between the two countries have been bogged down on the issue of tariffs and Japan's tight regulations on Indian generic drugs.

Manmohan Singh and his Japanese counterpart Taro Aso, a conservative who has long advocated building relations with India, are expected to sign an agreement for Japanese loan to fund the 1,468-km rail corridor between New Delhi and Mumbai.

Japan is expected to provide a $4.5 billion (450 billion yen) loan - the biggest-ever amount Tokyo has provided for an overseas project – for the ambitious infrastructure project.

Industry ministers of the two countries met to discuss the railway project ahead of the summit.

Commerce and industry minister Kamal Nath and his Japanese counterpart, Toshihiro Nikai, also discussed the creation of a fund for future infrastructure construction in India, the official said.

Nath said East Asia should serve as ''a driving force" for global growth in light of financial turmoil in the US and Europe.

Japan, which reluctantly backed the India-US deal on civil nuclear cooperation, is unlikely to sign a similar deal with India, official sources said.