NEW DELHI (Reuters) -- India has given a $1 billion line of credit to Bangladesh to help boost its infrastructure, officials said Tuesday, as New Delhi seeks to re-energize ties with a neighbor seen as crucial to its security.

Ties between the two countries suffered under the previous regime in Dhaka over Indian worries Bangladesh was being used by militants as a base. But Bangladeshi Prime Minister Sheikh Hasina, on a state visit, has sought to improve relations.
The two countries signed several pacts, including fighting militancy and crime together. Much of the $1 billion assistance will go into ramping up the Bangladeshi railway network and dredging of rivers.
India is concerned that its immediate neighborhood is being used by extremist groups and insurgents to mount attacks. After Indian Prime Minister Manmohan Singh met Hasina, a joint statement Tuesday said:
“(The leaders) resolved not to allow their respective territory to be used for training, sanctuary and other operations by domestic or foreign terrorist/militant and insurgent organizations and their operatives.”
Some goodwill gestures had been made by Dhaka, including what Indian media say is the recent capture and handing over of the chief of the ULFA, an armed separatist group, to India.
“We have agreed on the importance of showing sensitivity to each other's concerns,” Singh said at a dinner for Hasina.
India helped found Bangladesh after partition from Pakistan in 1971, but relations dipped in the past decade with a rise in the influence of the military and Islamist groups seen more tilted towards New Delhi's rivals China and Pakistan.
“India is keen to have a friendly cooperative Bangladesh which will not align itself with hostile powers, be it China or Pakistan,” said Brahma Chellaney, strategic studies professor at the New Delhi-based Centre for Policy Research.
A divisive issue has been the sharing of water from common rivers from the Himalayas flowing into Bangladesh which are considered a lifeline for millions in India and Bangladesh.
The statement said both leaders agreed to quickly conclude talks on sharing the waters of one disputed river, the Teesta.
Bangladesh had also strongly protested an Indian plan to dam a common river for a 1,500 Megawatts power plant.
India's reluctance to open up its markets for more Bangladeshi goods also adds to common Bangladeshis' resentment of a giant neighbor’s refusal to be accommodative.
“With a view to encouraging imports from Bangladesh, both countries agreed to address removal of tariff and non-tariff barriers...” the statement said.
Photo: Bangladesh's Prime Minister Sheikh Hasina smiles next to Chief of India's ruling Congress party Sonia Gandhi (R) before their meeting in New Delhi January 11, 2010. (Reuters photo)
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