DHAKA: Indian Prime Minister Narendra Modi has started a two-day visit to neighbouring Bangladesh during which he and his hosts will conclude a landmark land swap agreement to settle a border dispute.

Bangladesh actually endorsed the deal in 1974 but it was only last month that India's parliament gave its approval, teeing up Saturday's joint ratification ceremony between Modi and his counterpart Sheikh Hasina.

It calls for the transfer of 111 border enclaves to Bangladesh in exchange for 51 that will become part of India.

Under the agreement, the countries will exchange territories in India's northeastern states Assam, Tripura, Meghalaya and eastern West Bengal. People living in the enclaves will be allowed to choose to live in India or Bangladesh, with the option of being granted citizenship in the newly designated territories, and the enclaves would effectively cease to exist.

Around 50,000 people are thought to live in the landlocked islands and lack many basic services such as schools, clinics or utility services because they are cut-off from their national governments.

Relations between India and its smaller neighbour have significantly improved after Bangladeshi Prime Minister Sheikh Hasina promised her administration would not allow India's separatist insurgents to use the porous 4,000-kilometre border to carry out raids into India.

Also read: India takes step to resolve border dispute with BD

While Delhi's relations with China and Pakistan continue to be dogged by border disputes, the Land Boundary Agreement's ratification will remove a thorn that has troubled relations between the two countries since Bangladesh's 1971 war of secession from Pakistan.

India's intervention on behalf of the independence fighters proved decisive in that conflict and successive Bangladeshi governments have enjoyed close ties with their giant neighbour.

But an agreement on the ownership of 162 enclaves — essentially islands of land resulting from ownership arrangements made centuries ago by local princes — had proved elusive in the decades since.

'Watershed moment'

Modi has compared the agreement to the dismantling of the Berlin Wall which marks “a watershed moment in our ties with Bangladesh”.

Bangladesh has been similarly effusive, with Foreign Minister AH Mahmood Ali forecasting it “would open a new chapter” in ties.

India's Foreign Secretary Subrahmanyam Jaishankar said the deal would help combat smuggling of people, drugs and illegal currency.

"The enclaves in the past have been territories out of bounds for law enforcement agencies, often they have been misused to seek refuge by elements who have been undermining law and order," he told reporters. "So the clarity and discipline, which will come from the clearly demarcated borders will help the land border between the countries much more secure."

Wary of China's growing interest in India's backyard, Modi has been keen to play a greater leadership role in South Asia since coming to power.

Officials on both sides said Modi's visit would also see the signing of around 20 agreements aimed at boosting trade and transport links, including deals on the movement of goods across borders and rail projects.

"Regional connectivity and trade would be expanded by signing these deals. We are working to create facilitated mobility corridors for internal trading between the two countries," Ali told reporters.

The top Indian conglomerates Reliance and Adani are also expected to sign outline agreements to invest billions of dollars in Bangladesh's rickety power sector, according to the national electricity board.

But a breakthrough in a dispute about the sharing of water from the Teesta river which flows through both nations is not expected.

Modi's talks with Zia will also be closely watched by observers with the opposition leader's long-running calls for fresh elections having gained little traction.

Indian officials have played down the idea of Modi playing a mediation role in the dispute between Hasina and Zia but would instead pressure Zia to ensure an end to anti-government attacks.

Scores of people have been killed in firebomb attacks on vehicles since Zia called a transport blockade at the start of the year in a bid to topple Hasina.

India held off from criticising Hasina's re-election in January 2014 in a contest that was boycotted by the opposition and dismissed as “not credible” by Western nations.