NEW DELHI, Nov 28 (Reuter) - Chinese President Jiang Zemin on Thursday begins an historic visit to India aimed at improving ties between the world's two most populous nations.

Only hours before he arrived in New Delhi for a three-day state visit, Tibetan demonstrators demanding China quit their homeland staged a noisy protest in the Indian capital.

More than 600 protesters burnt an effigy of Jiang, the first Chinese head of state to visit India, and set fire to the Chinese flag at a Tibetan refugee camp in the city.

To keep delicate bilateral relations on track, both India and China were expected to avoid dwelling on the contentious issue of Tibet during official talks.

Indian officials say one step towards improving ties could be a troop reduction along a disputed Himalayan frontier, as well as a spur to trade and investment.

The two countries, home to one-third of humanity, fought a brief border war in 1962 and troops are still deployed along both sides of a rugged line of control.

"The Jiang visit comes at a point when India and China can, if they politically so desire, give a boost to their ties," columnist D. Sen wrote in the Hindustan Times daily.

Jiang, due to travel to Pakistan on Sunday, will be accompanied by Foreign Minister Qian Qichen, Minister of Foreign Trade Wu Yi, Civil Affairs Minister Doje Cering and the chairman of the Tibet Autonomus Regions Government, Gyain Cain Norbu.

He will meet President Shankar Dayal Sharma, Prime Minister H.D. Deve Gowda, Foreign Minister Inder Kumar Gujral and other senior officials. He will also address a business forum.

Salman Haider, the highest ranking civil servant in India's foreign ministry, said pacts on bilateral investment protection and strengthening shipping services were being finalised.

In the years ended in March 1995, bilateral trade totalled a modest 31.7 billion rupees ($889 million).

Pro-democracy Tibetan exiles said they planned to continue demonstrations throughout Jiang's visit.

No arrests were reported during the protest.

Tibetan Freedom Movement leaders said they planned to present an open letter to Jiang written in their own blood.

The New Delhi office of the Dalai Lama, Tibet's exiled spiritual leader, said it was not encouraging the protests.

India and China signed an agreement in 1993 to ease tension along their 4,000 km (2,500 mile) border during a visit by former prime minister P.V. Narasimha Rao to Beijing.

In August 1995, India and China agreed to pull back their troops from four border posts in India's northeastern state of Arunachal Pradesh, parts of which are claimed by China.

Officials said an agreement on confidence building measures along the line of actual control was expected to be signed during Jiang's visit.

Indian Foreign Secretary Haider said this would take a step further the agreement on maintenance of peace and tranquility on the border, signed during former Prime Minister P. V. Narasimha Rao's visit to Beijing in 1993.

Foreign ministry officials said China's defence cooperation with Pakistan, India's traditional rival, would be among issues discussed during Jiang's talks with Indian leaders.

Pakistan has enjoyed close relations with China since the 1960s. In recent years, the two countries have been accused of secret nuclear and missile deals, which both have denied.