"You (India) have an interest in the wider region but you have not pursued it as vigorously as the other powers have," Lee said in his address to delegates at the South Asian Diaspora Convention.
"Your foreign service is perhaps proportionally smaller than it ought to be," he said, adding that India's focus so far has been on the South Asian subcontinent affairs.
"If you pursue your interests more vigorously and actively beyond the subcontinent, in fact, beyond the Indian Ocean, you should be a great trading country," the prime minister said.
"You (India) can make a contribution by participating in the affairs of the region and developing with it," Lee said.
He said he would like to see India participate in the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership.
"We would like to see these pursued ambitiously," Lee said even as he called on Indian companies based in Singapore to lobby for the New Delhi government.
Stressing on the need to have open skies with India and other South Asian countries, he said," If we can have open skies, ideally, I think all the airlines will scramble to work hard. There business will prosper, tourism and investment will thrive."
Noting that there are some 464 weekly flights between India and Singapore running at full capacity, Lee said increasing connectivity has always been a part of his agenda on his visit to India.
Highlighting India's role in the region, he said,"We have invited and welcomed the Indian companies to come. I think we have 6,500 Indian companies in Singapore, some of which run their Indian operations headquarters out of Singapore."
The prime minister also applauded India's young population and demographic advantage, saying , "If you educate and employ them productively, it is a tremendous plus for the country.