New Delhi has agreed to buy the Hawk jet trainer from the UK's BAE Systems, ending years of indecision over the deal.
The government has been close to approving the purchase on several occasions since the early 1980s but each time political sensitivities led to the deal's collapse. The 800m ($1.3bn) order for 66 jets is part of a 1.1bn training deal, which will initially see Indian air force pilots trained in the UK.
Persistent corruption claims have dogged attempts by the Indian military to modernise its equipment following the Swedish Bofors gun scandal in the late 1980s, which led to the collapse of Rajiv Gandhi's government.
George Fernandes, India's defence minister, was forced to resign two years ago after defence officials were filmed taking bribes. He was reinstated soon afterwards. Other attempts to sell the Hawk to India were stymied by sanctions imposed by western nations after India conducted nuclear tests in 1998.
The decision was postponed again last year at the last minute after US lobbying on behalf of a rival Czech jet trainer made by Vodochody, which is 35 per cent controlled by Boeing.
Analysts said India's largest defence purchase in more than a decade paved the way for more foreign arms contracts, including a deal with Israel for early warning aircraft. Uday Bhaskar, deputy director of the state-funded Institute for Defence Studies and Analyses, said: "I hope [the Hawk deal] now gives the green light for further procurement."
The initial batch of about 24 jets will be manufactured in the UK with the remainder built in India under licence by Hindustan Aeronautics.
The Hawk is the most successful aircraft of its type in the world. It is used by both the Royal Air Force and the US Navy. India becomes the 19th customer and the deal takes the sales of the aircraft to more than 800. The sub-sonic aircraft is primarily designed to train pilots to fly high-performance jets.
The Indian order, and a UK decision last month to buy 20 Hawks, will safeguard thousands of British aerospace jobs, which were under threat as orders began to dry up.
It will also provide a small boost for Geoff Hoon, UK defence secretary, who is under pressure because of Lord Hutton's inquiry into the death of David Kelly, the scientist at the heart of the Iraq weapons row which has plunged the British government into crisis.
Mr Hoon overrode advice from his officials that the jet was too expensive and snubbed Treasury demands that foreign companies should be allowed to compete for the UK contract.