Palestinian Authority President Mahmoud Abbas Tuesday underlined India's importance to the Middle East peace process as India promised is ongoing support and announced a 20-million-dollar assistance package.

"India is playing an important role in all fields (concerning Palestine), including the peace process ... We appreciate India's support," Abbas said.

In a meeting with Indian Prime Minister Manmohan Singh, Abbas discussed issues related to the Middle East peace process, officials said.

Abbas arrived in New Delhi Monday night for a four-day official visit accompanied by Foreign Minister Riyad Al-Maliki and senior officials.

"The two leaders discussed a range of issues including chalking a roadmap for future cooperation and developmental works in Palestine," a Palestinian spokesman said.

India announced it will assist the Palestinian Authority with 20 million dollars for budgetary support and developmental projects.

During the meeting between Singh and Abbas, the two sides also signed an agreement under which India was to build a school near Jerusalem.

"The situation in the Middle East figured prominently in the discussions. The Indian side was apprised on the latest developments in this regard," the spokesman added.

Singh told reporters that India favoured a negotiated settlement that could result in a "sovereign, independent, viable and united state of Palestine living within secure and recognized borders side by side at peace with Israel."

He said the settlement should be based on relevant United Nations resolutions, an Arab peace plan and the roadmap of the Mideast Quartet - the UN, the United States, the European Union and Russia.

Abbas' visit comes at a time when the peace process is under strain and India is being viewed as an interlocutor since it has good relations with both Israel and the Palestinians.

However, New Delhi has refrained from getting directly involved so far.

India has been a supporter of the Palestinian people's "legitimate right" to statehood and was among the first countries to recognize the declaration of the state of Palestine in 1988.

But New Delhi has been walking a diplomatic tightrope ever since it recognized Israel in 1992.

Over the past decade, its relations with Israel have steadily grown and the two countries developed strong diplomatic, military and trade ties. Israel is now the second largest arms supplier to India after Russia.

The warming Indian-Israeli ties aroused suspicion in Arab world where India traditionally enjoyed good relations.

However, New Delhi has asserted that its ties with the Palestinian people are on a different plane and repeatedly reiterated its commitment for the Palestinian cause.

Abbas was scheduled to meet his Indian counterpart Pratibha Patil, Vice President Hamid Ansari and United Progressive Alliance chairwoman Sonia Gandhi later on Tuesday.

It is Abbas' second visit to India since taking office. He first visited India in May 2005.

Following his official engagements on Tuesday, Abbas will visit the Taj Mahal in the northern city Agra on Wednesday. He is scheduled to conclude his visit and leave New Delhi for Sri Lanka on Thursday.