The two sides signed a memorandum of understanding on industrial parks for providing an enabling framework for Chinese companies to invest in industrial zones.

Under the pact, the Asian neighbors agreed to cooperate to increase mutual investment in each other's economies, in accordance with the relevant domestic laws and regulations, for mutual benefits.

The pact also ensures an Industrial Park Cooperation Working Group made up of an equal number of representatives from both countries to identify and agree upon the detailed modalities for implementing cooperation under the agreement.

Chandrajit Banerjee, director general of the Confederation of Indian Industry, believes that the setting up of industrial parks is the perfect model for increasing manufacturing investments. "China can invest in manufacturing facilities in India to leverage cost competitive environment and skilled workforce in the country."

The infrastructure sector is another area where China can contribute, Banerjee says. "Railway cooperation should also be high on the agenda. The services sector and tourism have great potential as more Chinese people travel outward. IT, skills development and healthcaresectors are other areas of opportunity for India and China," he says.

At present, Chinese investment in India stands at $1.1 billion, mostly in Gujarat, Modi's home state.

Sidharth Birla, president of the Federation of Indian Chambers of Commerce and Industry, says: "We need to improve the quality of our trade, address the issue of trade imbalance and enhance market access on either side."

Over the past five years, India's imports from China have shot up more than 60 percent, and the two countries are on course to achieve the bilateral trade target of $100 billion by 2015.

"China's two-way trade with India has far exceeded India's with both Japan and the US, and India's economy is more complementary with China than with either the US or Japan," says John Wong, a professor at the East Asian Institute at the National University of Singapore.

In 2013, according to the General Administration of Customs of China, bilateral trade between China and India was at $65.47 billion. The administration's latest figures show that the total volume of bilateral trade from January to April this year amounts to $21.98 billion.

"Chinese companies are becoming global, so the Indian IT industry should focus on China's markets to build business relationships with Chinese corporations," opines Rangarajan Vellamore, CEO of business and technology consultancy Infosys China.

China has already shown positive signs about corporating with India to reduce its trade deficit. Xi has agreed to resolve the bilateral trade imbalance between the two countries, saying "balance in trade is necesssary for a sustainable economic relationship".

Various reports suggest that China is now considering opening a new route for reaching Manasarovar, one of the holiest sites for Indian visitors, situated in the Tibet autonomous region.

"China and India are historically related and culturally rooted with each other, and there is a genuine desire among people of India and China to have a closer relationship," says R Vaidyanathan of the Bangalore-based Indian Institute of Maanagement.