Hundreds of global weapons' firms have descended on the defence fair

News of the deal, agreed in January, emerged during South Asia's biggest defence fair in New Delhi.

Hundreds of global weapons firms are displaying their wares at DefExpo2008 in an effort to grab a share of India's expanding defence budget.

India is keen to modernise its Soviet-era weaponry.

Cold War politics meant that India relied on Russian military hardware and it currently has no US-made combat aircraft.

India's air force flies Russian-made MiG and Sukhoi fighters, British Jaguars and French Mirages.

Lockheed, the world's biggest defence contractor, is bidding against US aerospace giant Boeing and Russian and European rivals for contracts, including a deal worth as much as $12bn to sell 126 multi-role fighters jets.

Over the weekend, the state-run Israel Aerospace Industries and business conglomerate Tata agreed a joint venture to produce drones, radar and electronic warfare systems.

Israel is India's second largest arms supplier after Russia, with France in third place.