In a breakthrough in bilateral economic relations, India and Japan have successfully concluded negotiations for a CEPA pact that will liberalise trade between them, even as PM Manmohan Singh promised to carry forward reforms of taxes, financial sector and capital markets.

The progress in the talks for a Comprehensive Economic Partnership Agreement (CEPA) came at the end of discussions between Singh and his Japanese counterpart Naota Kan which covered a wide range of subjects.

“Having confirmed the progress made thus far in our work, we now declare the successful conclusion of negotiations for the Comprehensive Economic Partnership Agreement. We expressed our intention that the India-Japan CEPA will be signed at the earliest at Ministerial level, on completion of necessary formalities by both sides,” a joint declaration signed by the two leaders said on Monday.

They said the CEPA will be truly comprehensive by including fields that range from Trade in Goods, Investment, Trade in Services, and Movement of Natural Persons to Intellectual Property, Competition, Improvement of the Business Environment, Bilateral Cooperation and so forth.

“We also expressed our determination to put the India-Japan CEPA into effect soon after its signing and the completion of necessary procedures in each country,” the declaration said.

Singh said the “historic achievement” would open up new business opportunities and lead to a “quantum increase” in trade and investment flows between the two countries.

Earlier in the day, addressing the captains of Japanese industry and business, Singh said his government was determined to continue the economic reforms to create a favourable investment environment and facilitate higher capital inflows.

He promised to push the reform of both direct and indirect taxes with the aim of unifying indirect taxes into a single Goods and Services Tax in due course.

At their meeting, Singh and Kan noted that Japanese Foreign Direct Investment into India had witnessed an increase.

However, the Prime Minister said the economic cooperation had not reached the threshold despite the huge opportunities being offered by India where economy was growing rapidly.

Underlining that he was not underestimating “many challenges” that are faced in achieving such high level of growth; he said “we need to close the infrastructure deficit, especially in the power, transport and communication sectors.”

“This is a major constraint on our development and we will give high priority to infrastructure development in the years ahead,” he said, adding during India’s next five-year plan from 2012 to 2017 “we envisage financial outlays of over one trillion US dollars on infrastructure projects.”