NEW DELHI (Reuters) - India and the United States are closing in on an industrial security agreement that will allow the transfer of defense technology, sources said on Monday, ahead of U.S. Secretary of State Mike Pompeo’s talks in New Delhi this week to promote strategic ties.

FILE PHOTO: A man holds the flags of India and the U.S. while people take part in the 35th India Day Parade in New York August 16, 2015. REUTERS/Eduardo Munoz/File Photo

Disputes over trade and protectionist moves have escalated between the two countries in recent months, but defense ties remain strong with Washington seeking to build Indian capabilities as a counterweight to China.

India has bought weapons worth more than $15 billion from the United States over the past decade as it seeks to replace its Russian-origin military and is in talks for helicopters, armed drones and a bigger Indian plan for local production of combat planes together worth billions of dollars.

To allow for transfer of technology for building combat jets locally and other joint ventures, the United States had sought guarantees for the protection of classified information and technology.

A draft of the agreement called Industrial Security Annex is now ready and will go up before the Indian cabinet for approval in the next few weeks, sources aware of the India-US defense negotiations said.

It would be the first time New Delhi has entered into such a pact with any country, although the United States has such agreements in place with several countries, one of the sources said.

Lockheed Martin and Boeing are both in the race for a deal estimated at over $15 billion to supply the Indian air force with 114 fighter planes to replace its aging fleet of Mig 21 jets.

The planes have to be built in the country as part of Prime Minister Narendra Modi’s Make-in-India drive to cut expensive imports and build a domestic industry.

Pompeo will arrive in New Delhi on Tuesday and will hold talks with Modi and his Indian counterpart Subrahmanyan Jaishankar the following day.

After years of hesitation, India signed an agreement in 2016 to allow both countries to access each other’s military bases and a second one last year on secure military communications.

A third accord on sharing geospatial information is still in the early stages, the source said. These are all foundational agreements designed for closer military cooperation, the source said.