Clinton, right, stayed at the Taj Mahal Hotel, one of the hotels targeted in the Mumbai attacks [AFP]

She has also been visiting sites for civilian nuclear reactors as part of her mission on the five-day visit.

"We are working very hard to finalise a number of agreements. I am optimistic that we will get such agreements resolved and announced," she said on Saturday in response to a question about an arms "end-user monitoring" pact.

Under US law, such a pact is necessary for US firms to bid on India's plan to buy 126 multi-role fighters, which would be one of the largest arms deals in the world and could be a boon to Lockheed Martin Corp and Boeing Co.

That deal is worth an estimated $10.4bn, part of India's $30bn plan to modernise its military over the next five years.

Business meetings

In Mumbai, India's commercial capital, Clinton met business leaders to discuss trade relations.

Clinton - who stayed at the Taj Mahal Palace hotel, scene of last year's terror attacks in Mumbai - met the hotel staff and signed a remembrance book at a function that was closed to the media.

Clinton has called on India to help support Pakistan's efforts to fight terrorism.

She made the appeal in an opinion piece published by the Times of India to coincide with her arrival on Friday.

"We both seek a more secure world for our citizens. We should intensify our defence and law enforcement co-operation to that end," Clinton wrote, in reference to India.

The visit is aimed at bolstering ties with New Delhi on trade, climate change policy and arms control.

Clinton is set to hold talks with Manmohan Singh, India's prime minister, in New Delhi on Sunday.

Tensions persist

Clinton's apparent effort to smooth ties between India and Pakistan comes amid continued tension between New Delhi and Islamabad.

Although Singh and Yusuf Raza Gilani, his Pakistani counterpart, agreed on Thursday to jointly fight terrorism, Singh has said that formal peace talks with Pakistan are still on hold.

India wants Pakistan to punish those responsible for the Mumbai attacks and stop armed groups from using its territory to carry out attacks in India before the peace talks, known as the composite dialogue, can resume.

"It only strengthens our stand that we wouldn't like Pakistan to wait for the resumption of the composite dialogue ... but take action against terrorist elements regardless of these processes that may lead to resumption," Singh told parliament on Friday.

Washington is aiming to improve relations between India and Pakistan so that it can keep Pakistan's army focused on fighting Taliban fighters based along its western border with Afghanistan.

But India was highly critical when a Pakistani court freed Hafiz Mohammad Saeed, the founder of Lashkar-e-Taiba, who is wanted for suspected involvement in the Mumbai assaults.

India has arrest warrants against 21 other Pakistanis over the attacks.

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