New Delhi praises Myanmar's recent steps towards democracy during President Thein Sein's official visit.
India has promised Myanmar a $500m credit line to improve infrastructure after praising the country's steps towards democracy as it tentatively opens up after half a century of harsh military rule.
The money and warm words on Friday came as Myanmar President Thein Sein met Indian Prime Minister Manmohan Singh in New Delhi during a four-day state trip.
Myanmar has been on a campaign to shed its international pariah status.
The country recently launched economic reforms and eased limits on freedom of speech by relaxing censorship and unblocking banned websites.
It also freed several hundred political prisoners earlier this week, the latest sign of reforms in the poor and tightly controlled Southeast Asian country of 50 million people.
Thein Sein has surprised critics by signalling a series of political reforms since taking power in a controversial election last November, and has also held direct talks with pro-democracy leader Aung San Suu Kyi.
On Friday, the leaders of both countries agreed to expand co-operation in oil and gas exploration, open up border trade and speed up the construction of natural gas pipelines.
They emphasised in a joint statement the need for energy security, and Myanmar agreed to encourage more Indian investments in its energy sector.
Private and state-owned Indian energy companies have already made substantial investments in Myanmar.
Myanmar has large undeveloped gas reserves and straddles busy Bay of Bengal shipping lanes, making it strategically important for energy-hungry emerging power neighbours India and China.
"The prime minister of India congratulated the president of Myanmar on the transition towards democratic government and offered all necessary assistance in further strengthening this democratic transition," they said in a joint statement.
India has long weathered criticism from international partners for its accommodating stance to Myanmar.
New Delhi feels the signs of reform vindicate its policy of engagement.
India put aside concerns about human rights in the early 1990s for fear of losing access to oil and gas as China stepped in with military assistance and loans to help the country withstand sanctions.
The United States, Europe and Australia are unlikely to soften sanctions on Myanmar unless nearly 2,000 more political prisoners are released.
Other Asian countries, however, are keen to access resources in the mainly Buddhist nation.
The $500m credit line follows a similar $300m scheme last year. India buys most of Myanmar's agricultural exports and wants its neighbour to raise output further by planting on idle land.
Trade between India and Myanmar totalled $1.28bn last year. The two countries have set a modest target of $3bn by 2015.