In a bid to further boost the growing bilateral trade, Sri Lanka is seeking to upgrade its free trade agreement with India to include services and investments, officials said in Colombo.

The possibility of an economic cooperation agreement will be taken up during the joint commission talks with Indian Foreign Minister Yashwant Sinha on Wednesday, officials said.

Trade ministry officials said Prime Minister Ranil Wickremesinghe will have with him an outline of a proposed economic cooperation agreement when he travels to New Delhi at the weekend.

The free trade agreement currently covers only goods but not services and investments.

A trade gap that favoured India has come down sharply since the two countries signed a free trade agreement in 1998.

The balance of trade which favoured India 15 to one when the agreement was signed has come down to five to one, according to the central bank in Colombo.

Bilateral trade reached $1 billion last year with Indian exports amounting to $831 million, up from $604 million in 2001.

Sri Lanka's exports to India rose more dramatically to hit $167.7 million last year, up from $70.8 million in 2001. India, however still does not allow free access to Sri Lanka's main export commodity tea as well as garments.

India is expected to emerge as Sri Lanka's largest investor this year with Indian Oil Company taking over an oil storage farm in the island's north-east and 100 pumping stations throughout the island.

The Tata group is also due to build a new hotel in the south of the island.

Sinha arrives here later on Tuesday on a brief two-day visit during which he is due to hold talks with President Chandrika Kumaratunga and Prime Minister Ranil Wickremesinghe.

He is also scheduled to take part in a joint commission meeting on Wednesday to address outstanding trade issues, diplomats said.

The privately-run The Island newspaper said Sri Lanka had been bending over backwards to appease India and get its support for the island's peace bid with Tamil rebels.

India officially remains aloof, but was giving "covert support in intelligence and defence related matter," The Island said.

Sinha will also use the visit to sign an agreement with his counterpart from Mauritius, Anil Kumarsingh Gayan, who stayed on in Colombo after attending a regional conference here.

They are due to sign an agreement for India to give $12 million for the construction of a convention centre in Mauritius.