Software behemoth Microsoft is to invest $400m (�252m) to expand its activities and promote technology development in India.

The announcement comes as Billl Gates, the company's chairman, is touring India on a trip mixing business with philanthropy.

On Monday, he announced that his charity, the Bill and Melinda Gates Foundation, was to make a $100m grant to tackle Aids in India.

Mr Gates said these new investments, to be spread over three years, would include expanding the company's software development centre and improving computer literacy in India via a number of different projects.

"As we enter the digital decade the opportunities before us to drive innovation are immense," Mr Gates said in a statement.

"This presents a unique role for the government of India to create vibrant knowledge-based economy that encourages innovation."

Indian boost

Details of the investments are still to be worked out, but the firm said it would increase the number of engineers at its software development centre in Hyderabad from the current 150 to 500 by 2005.

As well as investing in Microsoft India, the firm will also be ploughing $1m into Media Lab Asia, a government technology research institute, and $20m into Shiksha, an online learning project.

Mr Gates made the commitments during an hour-long meeting with Communications and IT Minister Pramod Mahajan.

The two also discussed telecom growth in the country in the past two years, government's efforts in tackling the digital divide and the community information centre projects in the north-east of India.

Like many international software firms, Microsoft is increasingly reliant on India as a source of cheap programming talent.

Some 20% of the company's software engineers are of Indian extraction.