Japan will build India's first bullet train and provide a $12bn package of financing and a low-cost, long-term loan for the effort, the countries announced on Saturday.
Prime Minister Shinzo Abe was welcomed in New Delhi by his Indian counterpart Narendra Modi who said Japan has played a "decisive role in India's economic transformation".
"I cannot think of a strategic partnership that can exercise a more profound influence on shaping the course of Asia and our interlinked ocean regions more than ours," Modi said.
The new bullet train will slash journey times between the Indian cities of Mumbai and Ahmedabad, reportedly from eight hours to about two hours.
"This enterprise will launch a revolution in Indian railways and speed up India's journey into the future," said Modi, who has pledged to overhaul India's ramshackle railways and other infrastructure.
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Critics said instead of investing such a huge amount of money on a project that will be used mostly by rich businessmen, the government should have addressed dilapidated infrastructure.
Cultural exchange
Other agreements signed Saturday included stepping up the transfer of defence equipment and technology, with possible future projects including Japanese-made seaplanes.
They also agreed a memorandum of understanding on the peaceful use of nuclear energy, which will be signed once technical details have been finalised.
Japan has in the past shunned civil nuclear cooperation with India, which has not ratified the international Non-Proliferation Treaty, but appears to have softened its stance.
The announcements came after Abe lavished praise on Modi's 18-month-old premiership following a meeting with business leaders in the capital.
"Prime Minister Modi's economic policies are like Shinkansen - high speed, safe and reliable while carrying many people along," he said.
Both Modi and Abe are right-wing nationalists and economic reformers who have forged an unusually close relationship since the Indian leader came to power last year, partly to counter China's growing influence.
The leaders of Japan and India, Asia's second and third-largest economies, promised to use their alliance to push areas of mutual interest, including reform of the UN Security Council, on which both are seeking permanent seats.
Modi, who hopes to attract foreign investment under his key Make in India campaign, lauded the recent decision by Japanese-owned carmaker Maruti Suzuki to begin the first exports of Indian-made cars to Japan.
India's economic growth accelerated to 7.4 percent in the second quarter of the financial year, figures released in November showed, outperforming China.
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