A day after India and Bahrain signed a key pact to curb tax evasion, the two countries Friday underlined the need for raising their bilateral trade to a higher level by developing synergies between their economies.

A joint statement said India and Bahrain planned to further strengthen this relationship by "developing synergies and integrating the comparative advantages of the two economies". They decided to raise the trade to a higher level and enhance Indian investments in Bahrain and Bahraini investments in India.

Bahrain's Crown Prince Salman bin Hamad Al Khalifa held talks with Prime Minister Manmohan Singh on a wide range of issues, including accelerated trade and investment, defence cooperation and combating terrorism. He also met President Pratibha Patil, Vice President Hamid Ansari and External Affairs Minister S.M. Krishna.

After the talks, India and Bahrain, home to home to nearly 350,000 Indian nationals, signed a key tax information exchange agreement and another pact on information technology to accelerate economic and joint investment between the two countries.

Although the focus of the visit was economic, the two sides also discussed issues aimed at expanding defence and strategic cooperation between the two countries. "Issues of mutual concern in the region were discussed and the importance attached by India to peace and stability in the entire region was emphasized," the statement said.

"Both sides also underlined the need to resolve all differences through peaceful dialogue and without recourse to violence," said the statement.

The government's recent decision to open the doors for qualified foreign investors from Gulf countries has the potential to upgrade economic ties between the two countries. Other steps that will boost economic ties included signing of a Memorandum of Understanding (MoU) between the Bahrain Chamber of Commerce & Industry and the Confederation of Indian Industry (CII) and the setting up of the India-Bahrain Business Council.

India's finance ministry Tuesday has taken a decision to allow qualified foreign investors (QFIs) from six member-countries of the Gulf Cooperation Council (GCC) and 27 countries of the European Commission (EC) to invest in India to enhance foreign capital inflows. The GCC comprises Saudi Arabia, Bahrain, the United Arab Emirates (UAE), Oman and Qatar.