The Indian government has awarded a $2.6 billion contract to General Electric to develop and supply Indian Railways with 1,000 diesel locomotives over a period of 11 years, a company statement said on Monday.

In accordance with the contract, GE is set to invest $200 million to build a factory and maintenance sheds in the country, in what is being touted as the company's largest deal in their 100-year history in India.

"It is a major advancement and milestone for India and for GE, a symbol of our commitment and support of the 'Make in India' initiative," GE Chairman and CEO Jeff Immelt said in a statement.

The "Make in India" initiative is one of Indian Prime Minister Narendra Modi's flagship policies, aimed at seeking larger amounts of foreign direct investment (FDI) in the country to spur growth in domestic manufacturing.

Modi, who won a landslide election last year with the promise of creating jobs by fostering a business friendly environment, has touted India's policy reforms and faster project clearances to seek investment in the country.

India's vast but crumbling railway network has received special attention under Modi's government, with Railways Minister Suresh Prabhu pledging to spend around $137 billion to modernise it over the next five years.

As a part of this effort, the Indian government last year also allowed 100 percent foreign direct investment (FDI) in the railway sector.

"(The) diesel locomotive project marks one of the first major initiatives of FDI in enhancing India's rail locomotive capacity," GE said in the statement.