BARMER: Britain's Cairn Energy on Saturday began pumping crude from a vast oilfield in the Indian desert state of Rajasthan that is set to increase the country's crude output by 20 percent.

Indian Prime Minister Manmohan Singh told a ceremony inaugurating the field that Cairn's success showed global investors that "India has a good climate for foreign investment."

"I invite investors from around the world to come and invest in India," he said from the western Thar Desert, site of the Cairn development.

"The government will give all its support," he promised.

Cairn's field, the country's largest onland field and the biggest find in over two decades, will increase India's oil output by 20 percent once it hits its initial peak production target of 175,000 barrels a day in 2011.

India, which imports at least 70 percent of its oil needs, has been frantically racing to find new energy sources to fuel its fast-growing economy.

Cairn, which has spent two billion dollars so far on developing the field, plans to invest up to 1.3 billion dollars more to increase production.

Cairn bought out the field in 2002 from Anglo-Dutch giant Shell, which had concluded it contained no major reserves. Two years later, Edinburgh-based Cairn struck oil.

Cairn founder and chairman Bill Gammell said he had never dreamt the find would turn out to be so big.

"I knew it had enormous potential but I didn't envisage the size and scale," he told the ceremony held in a huge tent under baking sun.

"I look forward to many more years of development," he said.

Launch of the oil field kicked off to the thumping background tune of "Jai Ho," the Oscar-winning theme song from "Slumdog Millionaire."

Cairn estimates the Barmer field, in which state-run Oil and Natural Gas Corp holds 30 percent, contains 3.5 billion barrels of crude, of which it is technically feasible to recover at least one billion barrels.

Gammell said Cairn's success in working with the Indian government in developing the field was a "clear signal to the rest of the world that India provides opportunities and support" to foreign investors.

He said the five years it took between discovery of the oil and bringing it on stream was a "timescale few countries can match."

India has been courting foreign investment to propel economic growth but many investors have complained about frustrating regulatory hurdles and bureaucratic red tape.

A number of big foreign investments such as a 12-billion-dollar project by South Korean steelmaker POSCO have been hit by delays.

Cairn has made 25 oil discoveries in the Barmer region -- of which the three biggest are Mangala, Bhagyam and Aishwariya.

Petroleum Minister Murli Deora said the field's output would shave seven percent off India's oil import bill.

The crude will be trucked to state-run refiners until the completion of a pipeline slated for year end.

Deora said India needs to conduct more exploration, adding the Barmer and other recent finds were proof India is "rich in hydrocarbon reserves."

That was in contrast to expert views after India's independence in 1947 that the country was "hydrocarbon barren," he said.