India, Iran and Afghanistan have agreed to develop a modern port outside the Gulf as well as road and rail links that would allow New Delhi and Kabul to bypass a hostile Pakistan and strengthen trade between south and central Asia.

Narendra Modi, Indian prime minister, said in Tehran his country would spend $500m to develop Iran’s Chabahar port on the Gulf of Oman and related infrastructure in a “milestone” deal that would boost growth, spur the unhindered flow of commerce in the region and give landlocked Afghanistan “an assured, effective and a more friendly route to trade with the rest of the world”.

The Chabahar project — one of several plans in the region to develop trade corridors for oil, gas and other goods — has been mooted for the past 14 years. Its revival now has been prompted by the easing of international sanctions against Iran and growing frustration among Afghans and Indians with Pakistani obstruction of cross-border trade.