Prime Minister Manmohan Singh signs an agreement as his Bangladeshi counterpart Sheikh Hasina looks on in Dhaka.
By resolving a festering border tangle and seeking to reduce the trade imbalance, India and Bangladesh on Tuesday gave a fresh momentum to bilateral relations, which have been on an upswing since Sheikh Hasina became Prime Minister of Bangladesh in January 2009.
On the first day of Prime Minister Manmohan Singh's visit to Dhaka - the first after AB Vajpayee's in 1999 - both sides agreed to exchange 162 enclaves in each other's territory, settle all issues related to adverse possessions, and demarcate the last stretch of 6.5 km of the 4,096-km border.
There were some last-minute glitches that almost derailed the border agreement but it was pulled back from the brink.
"There were some issues but we resolved them," foreign secretary Ranjan Mathai said.
On the trade front, 61 more items from Bangladesh will get duty-free access to Indian markets, to cut down the trade imbalance.
India exported to goods worth $4,586 million to Bangladesh against imports of $512 million in 2010-11, leaving a huge imbalance in India's favour.
Of the 61, textile-related items account for 46. Textiles constitute 75% of Bangladesh's total exports.
While border and trade were the highlights of Singh's visit, India's inability to deliver on a treaty for sharing the waters of the Teesta and Feni rivers somewhat dampened spirits, though both sides sought to play down the issue.
Resistance from West Bengal chief minister Mamata Banerjee had forced the government to go back on the water-sharing pact.
"We have decided to continue discussions to reach a mutually acceptable, fair and amicable arrangement for the sharing of river waters," Singh said.
Singh, who received a rousing reception at the airport, sought to compensate Bangladesh's disappointment over water-sharing by declaring a zero-duty regime for 61 more items rather than a mere reduction in duties.
Sheikh Hasina said, "We have come a long way towards materialising our common vision into reality. But we still have a long way to go."
Singh said at a banquet hosted by Hasina in his honour, "There is a national consensus in India that India must develop the best possible relations with Bangladesh."