India should fully open "even supposedly sensitive" sectors such as finance, defence, atomic energy and FDI, a leading US think-tank said today.

It also stressed that Washington and New Delhi cannot afford to fail as it was important to maintain "favourable" balance of power in Asia.

Observing that the evolving India-US strategic partnership holds great potential for both countries, the prestigious Carnegie Endowment for International Peace, stressed that both sides must now take steps to make the partnership fruitful.

In a detailed report, it came out with a set of recommendations for both the Manmohan Singh Government and the Obama Administration, which is now preparing for its second term.

Recommendations for India include expanding the basis for collaboration, undertaking planned 2nd-generation economic reforms, encouraging foreign direct investment, improving defence cooperation with key states and using its influence with Iran to abandon its nuclear weapons program.

"There is no conceivable reason today why the Indian state should not fully open even supposedly sensitive sectors such as finance, defence, and atomic energy to FDI," it said.

The report "Opportunities unbound: Sustaining the transformation in US-Indian relations" recommends US to explore a free-trade agreement with India, build up India's defence capabilities.

It noted that no American administration in recent years has ever sought to inveigle India into either a containment strategy or a military alliance aimed at China.

"The US strategy toward India is not aimed at getting New Delhi to do anything against Beijing other than what it would do anyway for its own reasons.

"Helping India thrive as a strong, democratic, (even if perpetually) independent state is what the transformation of US-Indian relations is actually all about," the report said.

"Freed from the encumbrances of their enervating nuclear disagreement, the United States and India now have the opportunity to nurture their deep-rooted shared interests that make a genuine strategic partnership possible," Ashley Tellis, eminent American foreign policy expert and author of the report said.