India presents promising opportunities for Chinese investment, and New Delhi is encouraging more of it to narrow the trade deficit, but there are obstacles, too.

As China upgrades its domestic industries and extends industry chains, many manufacturers will head overseas to areas with lower costs. India, with its low labor cost but broad market, offers good opportunities for Chinese companies to operate and invest in, according to Liu Xiaoxue, an expert on South Asia at the Chinese Academy of Social Sciences.

The Indian government planned a new round of economic stimulus in January and has called for 17 state-owned companies to complete investments up to 17.6 trillion rupees ($340 billion) in the next fiscal year, The Times of India reported.

"The stimulus plan, if put into practice, presents attractive opportunities for Chinese investments in India because it is related to many key industries, including energy, infrastructure and power," said Song Hong, an economist with the Institute of World Economics and Politics under the Chinese Academy of Social Sciences.

But investors have encountered obstacles in tapping into the rewards, experts said.

"Chinese companies have complained about the unfavorable business environment in India, and obsolete land policies have often left investors in confrontations with farmers over disputed compensation for land. In addition, complex dismissal procedures have kept companies from getting good employees," Liu said.

Song added that India was guarding against Chinese investments when it turned down telecom equipment from China's telecom giant Huawei Technologies in 2006 for security concerns. Corruption and the low efficiency of government departments have also challenged investors, as have problematic water and power supplies.

India welcomes investment from China to narrow its increasing trade deficit - $27.1 billion in 2011 - according to Indramani Pandey, consul general of India in Guangzhou.

"With a view to reduce the growing trade deficit and create an enduring base for stable trade relations with China, India has been encouraging Chinese enterprises to invest in India. It is particularly interested in investment in infrastructure and manufacturing sectors," Pandey said in an e-mail.

Bilateral trade between the nations surged from $3 billion in 2000 to $73.9 billion in 2011. However, joint investments between them did not expand accordingly.

The fourth BRICS Summit was held in New Delhi on Wednesday and Thursday with the theme of "BRICS Partnership for Global Stability, Security and Prosperity".

"Investment in India could be very rewarding in the medium and long term", Pandey said, and advised Chinese companies to pay attention to India's foreign direct investment policy and try to understand its FDI procedures.

Liu Xiaoxue urged the Chinese government to pay more attention to the trade imbalance with India.

"To narrow the trade surplus with India, the Chinese government could organize large procurement groups to purchase Indian agricultural products, herbs, tea and nuts, which are of high quality but low in price," she said.