Earlier in the day, at the invitation of Prime Minister Narendra Modi, Obama was the first U.S. president to attend India's annual Republic Day parade, a show of military might that has been associated with Cold War anti-Americanism.

It rained as troops, tanks and cultural floats filed through the heart of New Delhi, but excitement nevertheless ran high over Obama's visit, which began on Sunday with a clutch of deals to unlock billions of dollars in nuclear trade and to deepen defense ties.

Both sides hope to build enough momentum to forge a relationship that will help balance China's rise by catapulting democratic India into the league of major world powers.

The leaders talked on first name terms, recorded a radio program together and spent hours speaking at different events, but despite the bonhomie, Obama and Modi reminded business leaders, including the head of PepsiCo, (PEP.N) that trade ties were still fragile.

India accounts for only 2 percent of U.S. imports and one percent of its exports, Obama said. While annual bilateral trade had reached $100 billion, that is less than a fifth of U.S. trade with China.

"We are moving in the right direction ... That said, we also know that the U.S.-India relationship is defined by so much untapped potential," Obama told the Indian and U.S. business leaders. "Everyone here will agree, we've got to do better."

Modi said U.S. investment in India had doubled in the past four months and vowed to do more to slash the country's notorious red tape and make it one of the world's easiest places for business.

Obama said that U.S. Export-Import Bank would finance $1 billion in exports of 'Made-in-America' products. The U.S. Overseas Private Investment Corporation will lend $1 billion to small- and medium-sized enterprises in rural areas of India.

Regarding renewable energy, a key focus for Modi, $2 billion will be committed by the U.S. Trade and Development Agency for renewable energy, Obama said.

Most significant was an agreement on issues that, despite a groundbreaking 2006 pact, had stopped U.S. companies from setting up nuclear reactors in India and had become one of the major irritants in bilateral relations.

"Mobama breaks N-deadlock," ran the front-page headline of the Mail Today newspaper, which carried a photograph of Modi and Obama hugging each other warmly.