Prime Minister Manmohan Singh of India has offered Afghanistan an additional $US500 million in aid.
The announcement was made in Kabul. The money is in addition to $US1.5 billion already promised.
The money will be spent on agriculture, schools and roads. India is already building a new parliament in Kabul at a cost of $U19 million.
The BBC reports India and Pakistan are vying for influence in Afghanistan.
After a meeting with President Hamid Karzai, Mr Singh also said he supported holding talks with the Taliban - an idea India previously rejected.
India and Afghanistan share concerns about networks of insurgents in Pakistan.
It is Mr Singh's second visit to Afghanistan. The first was six years ago.
He and Mr Karzai held discussions in Kabul on Thursday about regional stability, counter-terrorism and the India-Afghanistan strategic partnership, built on what correspondents say is largely a shared mistrust of Pakistan.
Mr Singh is to address a joint session of parliament on Friday.