India announces $450 million aid to Afghanistan

NEW DELHI (Reuters) - India announced fresh aid of $450 million to Afghanistan for development projects on Monday and both countries vowed to fight terrorism, weeks after a deadly attack at the Indian embassy in Kabul.

Afghanistan, India and the United States have accused Pakistan's spy agency of being involved in the July bombing that killed at least 58 people, including two Indian diplomats.

"It was an attack on the friendship of India and Afghanistan," Indian Prime Minister Manmohan Singh said shortly after meeting Afghan President Hamid Karzai, who is on a two-day visit to India.

"We have agreed that we will not allow terrorism to stand in our way, we will fight it unitedly and with full determination," Singh said.

India said after the Kabul attack that the peace process with Pakistan was "under stress" because its traditional foe was "inciting terror" inside India and trying to hit its interests abroad.

Analysts say that Pakistan is worried about India's rising influence in Afghanistan, the recipient of hundreds of millions of dollars of Indian development aid in recent years.

"We will allocate an additional amount of $450 million over the $750 million announced so far to effectively meet the requirement of our ongoing and forthcoming projects," Singh added.

New Delhi was a key backer of Afghan forces led by the Northern Alliance which, along with the U.S. military, overthrew the Taliban, previously aided by Pakistan.

India is now involved in training Afghanistan's police and diplomats, building roads and hospitals, and supporting trade and services as Afghanistan tries to rebuild its war-ravaged economy, despite continuing Taliban attacks.