The main issue, at least in the short term, has been an easing of restrictions on the export of US satellites for launch on Indian launch vehicles. This has the potential to both delight and disappoint US space firms, some of whom will probably miss out on launch contracts to their overseas rivals.

This article won't explore the full dynamics of this complex subject, but the move represents a major policy shift for the USA. It also suggests that other collaborative space projects could be possible in the future, if relations continue to improve.

How should India and the USA work together in space? It's a question that can't be reasonably answered until the USA decides on exactly what it wants to do with its own space program. Right now, there are plenty of people who could provide a roadmap, but it isn't clear what the volatile mix of America's politics and economics will produce in the near future.

Nevertheless, we can take stock of some of the current elements in play. The USA is about to retire its space shuttle fleet, but continue participation in the International Space Station for an extended period. It's also trying to incubate the development of a new flock of fledging private spacecraft.

The first hatchlings are unmanned cargo carriers, but some could transform into crew transfer vehicles. America is also maintaining a robust unmanned lunar and planetary exploration program.

India is a highly aspirational space player with a seasoned fleet of satellite buses and launch vehicles. It's pursuing an ambitious robot lunar exploration program, and hopes to fly to Mars in the near future. Most notably, India has begun the development of its own indigenous human spaceflight program, and is developing a capsule spacecraft.

Like China, India is a major economic and space power that is not a participant in the International Space Station. China has indicated interest in joining the ISS program, but has been rebuffed. Admitting India to ISS while excluding China would be a potentially controversial step. At the present, there is no truly clear message from India or any of the existing ISS partners on where they stand on this.

Until recently, there were plans to fly an Indian cosmonaut on a Soyuz mission, but it's curious to note that the spacecraft was never intended to dock with ISS. This would have been the first Soyuz flight without a mission to the Station since ISS began construction!

The mission plan alone hints at the controversy of admitting India in any deeper role as an ISS partner. Russia recently announced that the joint mission has been canceled, but remains on good terms with India's space program.

Russia is already strongly entrenched as a co-operative partner with India in spaceflight, and has already launched an Indian cosmonaut on a Soyuz mission to a Salyut space station. Russia is also providing hardware for the upcoming Chandrayaan-2 lunar mission.

India is unlikely to reduce its co-operation with Russia in spaceflight, and this may or may not influence the way America transfers technology to India. Then again, Russia already has an advanced grasp of boosters and spacecraft technology. America may feel that anything that isn't too sensitive to be shared with India is also not too sensitive to be blocked from Russian eyes.

Small steps would probably be a good way to start. India wants to explore the Moon and Mars. So does the USA. There has already been some co-operation in lunar exploration, with a US instrument flying on the first Indian Moon orbiter. If technology transfer issues can be resolved, it could be worth sharing more instruments.

At the very least, there could be a pooling of scientific data, and possibly coordinated observations by Indian and US spacecraft at the same target. There was an attempt to co-ordinate some observations between India's Chandrayaan-1 lunar orbiter and America's Lunar Reconnaissance Orbiter, but these did not work out for technical reasons.

India also has a highly developed remote sensing capability, serving both civil and strategic interests. Exactly how or if they will interact further with America on this front is unclear. Commercial remote sensing arrangements are already quite active by both US and Indian companies.

The ultimate prize would be co-operation in human spaceflight. This is a very fluid situation for both nations. By 2012, neither nation will have an operational astronaut transfer vehicle! India hopes to fly its own vehicle by 2015, but they will need to work rapidly if they wish to meet this very tight deadline.

There has been some talk of co-operation with a major US aerospace firm on the development of this spacecraft, but it is not known how or if this will happen. It's not clear when the USA will field its first post-Shuttle manned spacecraft, or what it will be. There could be technology sharing on this front, or at least some effort to promote standards in docking.

The recent release by the USA of an international standard for docking interfaces is a smart move that could shape India's thinking. This could be useful for joint missions outside of the ISS program, or allow for crew rescue in some circumstances.

US and Indian astronauts could fly together on new space stations in Earth orbit, either as guest astronauts on US vehicles, or with US and Indian transfer vehicles both docking at the same station.

Ultimately, both nations would love to send astronauts to the Moon. A collaborative program, possibly with other international partners, could defray the high costs of such a venture. It's probably too early to even draft a basic plan for such a mission, but visionaries in both nations are probably contemplating such a venture.

Dr Morris Jones is an Australian space analyst and writer. Email morrisjonesNOSPAMhotmail.com. Replace NOSPAM with @ to send email.

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