The government Friday paved the way for greater flow of investments between India and Latvia granting approval to the inking of a bilateral investment promotion protection agreement.

A meeting of the cabinet, chaired by Prime Minister Manmohan Singh, approved the signing of the agreement and its ratification thereafter.

"The conclusion of a bilateral investment promotion protection agreement with the Republic of Latvia and the ratification of the agreement will increase investment between the two countries," Finance Minister P. Chidambaram told reporters after the meeting.

"The agreement will further boost economic and trade co-operation between the two countries," Chidambaram said.

Latvia, a small country with a population of 2.6 million in northern Europe, has a good trading relationship with India exporting several commodities like metal and metal products, products of chemical industries, raw hides, fur skins, machinery and mechanical appliances.

Latvia imports prepared foodstuffs, products of chemical and allied industries, textiles and textile articles, and vegetable products from India.

India already has an agreement with Latvia on trade and economic co-operation and the two countries signed in 1993 a memorandum of understanding on the counter-trade and banking arrangements.

There is also a declaration of principles and directions of co-operation between Latvia and India as also a separate agreement on economic and technical co-operation between the two countries.

The two countries signed an agreement June 2001 on the inter-governmental commission on trade, economic, scientific, technological and cultural co-operation.