UPDATE 1-Malaysia-India FTA "to double trade by 2015"

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By Razak Ahmad

PUTRAJAYA, Malaysia Oct 27 (Reuters) - An India-Malaysia free trade deal is expected to almost double trade by 2015, allowing them to reduce dependence on traditional growth engines such as China and the United States.

The trade agreement will be signed by January 31 and come into force by July 1.

"When the agreement comes into force, $15 billion in trade can be reached by 2015, if not earlier," Malaysian Prime Minister Najib Razak told reporters after meeting Indian Premier Manmohan Singh.

The two countries said they would work together to develop the hydrocarbons and renewable energy industries and collaborate in banking and information technology.

Malaysia is India's 19th largest trade partner, with exports and imports totalling about $8 billion in 2009-2010. India is Malaysia's 12th largest trading partner. The United Arab Emirates is India's biggest trade partner, followed by China and the U.S.

Malaysia and India began free trade talks deal in February 2008 but negotiations were put on hold after two rounds to focus on the ASEAN-India Trade in Goods Agreement.

Singh said India would study Malaysia's Islamic banking industry as it explores the possibility of developing its market.

"There have been from time to time demands that we should experiment with Islamic banking and I would certainly recommend to Reserve Bank of India to look at what's happening to Malaysia in this record," he said. (Writing by Liau Y-Sing; Editing by Nick Macfie)