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UPDATE 1-India's Modi set to meet Obama in Washington in Sept -papers

(Adds comment, visit by U.S. diplomat)

NEW DELHI, June 5 (Reuters) - Indian Prime Minister Narendra Modi will visit Washington to meet President Barack Obama in September, two Indian newspapers reported on Thursday, signaling a new start in ties with a leader once denied a visa by the United States.

Modi, who swept to power in a general election last month, has accepted an invitation from Obama for two-way talks in Washington, the Times of India and the Hindustan Times said.

The Indian foreign ministry and the U.S. embassy both declined to comment. Jitendra Singh, a minister in Modi's office, said the report was speculative and suggested reporters wait for an official announcement.

U.S. Assistant Secretary of State Nisha Biswal is due in New Delhi on Friday for the first set of meetings with the new administration since it took office.

She is expected to meet Foreign Minister Sushma Swaraj and it is possible that Modi's trip could be announced at the end of her visit.

India and the United States are keen to boost security and economic ties - the Obama administration has set a goal of quintupling annual bilateral trade to $500 billion.

Scheduling has still to be finalized, but the summit would represent an upgrade from previous expectations that Modi, 63, would meet Obama on the sidelines of the annual United Nations general assembly in New York.

Indian leaders usually travel to the U.N. session and meet U.S. presidents there. Obama, though, extended an invitation to Modi to the White House during a phone call to congratulate him on his election victory on May 16.

"President Obama made a good move by inviting Narendra Modi to visit Washington and he has reciprocated by accepting the invitation," Lisa Curtis, a South Asia specialist at The Heritage Foundation, told CNNIBN television station.

VISA REFUSAL

Modi, a former chief minister of Gujarat, had been refused a U.S. visa over sectarian strife in the western Indian state in 2002, in which more than 1,000 people, mainly Muslims, were killed. He has denied any wrongdoing and an Indian Supreme Court inquiry found no case to answer.

The U.S. ambassador to India met Modi earlier this year, as opinion polls put his Bharatiya Janata Party (BJP) on course for an election victory. U.S. officials had said a visa and an invitation to meet would probably be forthcoming if Modi won.

Former junior foreign minister and a leader of the opposition Congress party Shashi Tharoor said that if Modi went to the United States for the U.N. session, it was likely he would meet the U.S.president.

"If the PM goes, he would have a plenty of opportunity to meet world leaders," he said. "I am sure something like this would be on the cards."

Modi wants to cautiously open up the Indian economy to foreign investment to boost growth and job creation.

His government may announce as soon as next month that it will allow foreign online retailers to sell their own products in India, creating a major business opportunity for players such as Amazon.

Curtis said a possible Modi visit would be an opportunity to put U.S.-India trade ties back on track.

The two countries have sparred in recent months over trade policies and patent laws.

India is widely perceived in Washington as a serial trade offender, with U.S. firms unhappy about imports of everything from shrimp to steel pipes, which they say threaten jobs, as well as a lack of fair access to the Indian market.

New Delhi has urged the Obama administration not to fall prey to special interest groups and consider trade issues in the context of wider economic and strategic ties between the two nations.

(Reporting by Douglas Busvine and Sanjeev Miglani; Editing by Clarence Fernandez)