Decades of fear and loathing are giving way to realpolitik in India's attitude to China in a radical new approach which New Delhi hopes will transform its relationship with its northern neighbour.

In a deliberate effort to see China as an opportunity rather than a threat, New Delhi is focusing on the potential economic gains of increasing bilateral trade after years of distrust dating back to a savage border war which India lost in 1962.

"India's policies will not be based on fear of Chinese power nor envy of China's economic achievements," foreign minister Yashwant Sinha told a conference on China last week.

"They will be based on the conviction that a prosperous India is inevitable. So is a strong and prosperous China," he said.

Prime Minister Atal Bihari Vajpayee is expected to visit China this year, underscoring a political thaw which parallels a sharp growth in trade between the two countries, which make up more than one-third of the world's population.

Trade and economic cooperation between India and China grew to $4.3 billion in the period from January to November 2002 from $264.8 billion in 1991, according to Sinha.

And although Indian imports of Chinese goods by far outstrip its exports to China, business leaders believe China's fast-growing economy will offer an increasingly attractive export market as it opens up to international trade.

"In India, China is no longer perceived as a threat. A lot of Indian companies are now looking at China as an opportunity," said Tapan Bhaumik from the Confederation of Indian Industry.

Indian politicians are quick to stress that the growing economic ties do not mean that all is forgotten and forgiven.

India still has bitter memories of the 1962 war, when it called China's bluff and tried to force it out of the disputed Aksai Chin region, a remote plateau to the northwest, after Beijing built a road through it leading into Tibet.

China responded by sending well-equipped troops to overrun India's much weaker army, whose very ill-preparedness reflected an assumption that the Chinese would never attack.

That fear of military superiority persists in New Delhi to this day - the nuclear arsenal it has been developing since 1998 includes the long-range Agni missile which targets nuclear-armed China as well as missiles targeting traditional rival Pakistan.

China in turn fears India has its own superpower ambitions.

Beijing was incensed by India's nuclear tests which tapped into its own fears of Indian aggression, which date back to India's readiness to shelter the Dalai Lama, Tibet's spiritual leader, after a revolt against Chinese rule in 1959.

China also blamed India for starting the 1962 war by digging in its heels over the exact location of the 4,500-km border through remote, mountainous territory which had barely been explored before, let alone demarcated.

To this day, Beijing and New Delhi have yet to agree on mapping out their border despite many rounds of talks.

Adding to the suspicion, New Delhi also accuses China of supplying nuclear and missile technology to Pakistan.

China denies this, although the US Central Intelligence Agency has said in a published report that Beijing provided extensive support to Islamabad's nuclear weapons and missile programmes, and continued to supply missile technology into 2001 even after promising to stop.

"India is the target of Chinese nuclear missiles from two directions," says Richard Fisher, from the US Center for Security Policy, who is sceptical of Chinese intentions.

"China is not obsessed with India to the same degree that India is obsessed with China. China is actually dismissive of India. As an Indian what can you say of a country that gives nuclear bombs to your self-declared enemy?"

The answer, say Indian officials, is to take one thing at a time and focus first on building economic ties.

"The key to enhancing Asian security lies in our collective ability to build mutual economic stakes in each other," Sinha said. "Economic integration and an overall improvement in relations has not been held hostage to differences over specific issues, however important those issues are."

Indian exports to China totaled $441 million or 2.09 percent of India's total exports in 2001-02, and are forecast to rise to $686 million or 2.73 per cent in 2002-03, according to commerce ministry figures.

It mainly exports raw materials, including iron ore, iron and steel, plastics, minerals, chemicals, drugs and cotton, while electronic goods make up a quarter of its imports from China.

Imports from China totaled $938 million, or 3.6 per cent of total imports, in 2001-02, forecast to rise to $1.22 billion or 4.28 per cent in 2003 - nearly double India's exports.

But Bhaumik says he is not too worried about the deficit. "We are looking at growth. People are realising the potential."