India and Sri Lanka said on Friday that they had agreed to improve economic ties by increasing cooperation in renewable energy and studying the feasibility of building an oil pipeline and a land bridge between the two countries.
New Delhi will also help develop a port and an economic hub at Trincomalee, a city on Sri Lanka's northeastern coast.
The announcements were made by the leaders of the two countries as Sri Lankan President Ranil Wickremesinghe held talks with Indian Prime Minister Narendra Modi in New Delhi on Friday morning.
India's support of nearly $4 billion between January and July last year was critical for Sri Lanka after it almost ran out of dollars and sank into a financial crisis that left it struggling to fund essential imports including fuel and medicine.
Modi said on Friday that the two leaders "adopted a vision document for our Economic Partnership" to strengthen maritime, air, energy and people-to-people connectivity, to accelerate mutual cooperation in tourism, power, trade, higher education, and skill development.
Modi also said the two sides would work quickly to connect their electricity grids and study the feasibility of building a petroleum pipeline and a land bridge between the countries, which are about 50 km (31 miles) apart at one point.
The projects to connect the power grids through undersea cables and the oil pipeline are expected to cost around $4 billion in total, according to officials on both sides. Few details were released on the agreements on renewables.
Wickremesinghe said that "constructing a multi-product petroleum pipeline from the southern part of India to Sri Lanka will ensure an affordable and reliable supply of energy to Sri Lanka."
The two countries also will soon restart negotiations on a more expansive trade deal known as the Economic and Technological Cooperation Agreement.
Wickremesinghe also said that he had updated Modi about the reform measures being taken by his government to resolve the island's financial crisis, and expressed appreciation for the support provided by India for the "most challenging period in modern history".
Sri Lanka defaulted on its foreign debt last May and India is part of a common platform established with Japan and other Paris Club members to help the island restructure its debt.
India remains a key creditor to the island with $1.9 billion in outstanding debt.
While New Delhi has traditionally had strong ties with its southern neighbour, the small island nation has become a jousting ground between India and China due to its strategic location in the Indian Ocean.
The two-day visit to New Delhi is Wickremesinghe's first since he took over as the president a year ago after his predecessor was forced out of office following widespread protests against the economic crisis.
(Reporting by Krishn Kaushik in NEW DELHI, additional reporting by Uditha Jayasinghe in COLOMBO and Shivam Patel in NEW DELHI; Editing by Himani Sarkar and Kim Coghill)