All eyes on major jet deal as India's Modi meets Hollande

PARIS - India's prime minister kicked off Friday talks in Paris with the French president with all eyes on a potential multi-billion-euro fighter jet deal hailed as the "contract of the century."

Once persona non grata in the European Union, Narendra Modi was welcomed with open arms by President Francois Hollande as he aims to woo investors to his fast-growing economy on the first leg of his maiden trip to the continent.

Ahead of the visit, fevered speculation has centred on whether Modi and Hollande will achieve a breakthrough in long-blocked talks over 126 French Rafale fighter jets.

The deal, dubbed the "contract of the century" in the French media, could be worth billions, but has been bogged down over cost and New Delhi's insistence on assembling a portion of the high-tech planes in India.

Hollande said ahead of his meeting with Modi at his Elysee Palace presidential office - where the two shook hands before stepping inside for talks - that he wanted to make "progress" on the thorny, long-standing issue.

Rafale talks 'ongoing' Friday

In a bid to get things moving, New Delhi is considering buying a first tranche of a smaller number of planes to replace its creaking air force fleet, Indian media reported.

The Hindustan Times said the government was "seriously considering (the) strategic purchase of up to 40 Rafales for the Indian Air Force" due to "operational necessity", with further purchases later.

It quoted an unnamed source as saying a new deal could be worked out this year, with the exact number of planes depending on the final price.

A French government source, who did not wish to be named, confirmed that talks were "ongoing" on Friday over the jets, but declined to give further details.

Indian defence analyst Saurabh Joshi said the country's air force urgently needed new jets in the face of antagonistic neighbours Pakistan and China, but cautioned that buying a smaller number was not cost effective.

Modi, a right-wing Hindu nationalist, was effectively blacklisted by the European Union for years, accused of encouraging deadly communal riots in 2002 in the western state of Gujarat, which he governed for over a decade.

But after his landslide victory in a general election last year, and with India's economy now growing faster than even China's, France and Germany are rolling out the red carpet for the one-time outcast.

Progress on nuclear deal?

"It's not a coincidence that France is the first country that I am visiting as part of my first official trip to Europe," Modi told French daily Le Figaro before his arrival, pointing to co-operation in a number of sectors such as space, nuclear energy and defence.

"Just like in the nuclear sector, defence co-operation is a key part of our traditional ties with France," he added.

French nuclear giant Areva is still awaiting the go-ahead to install six reactors in India's western state of Maharashtra, five years after a bilateral civil nuclear accord.

A French diplomatic source said agreements would be signed in the "renewable energy, sustainable cities, transport and cultural sectors".

After a two-day whistlestop tour that will take him from northern to southern France - with a short breather to take in the Paris sights from a boat ride on the Seine - Modi will jet off to Germany.

He will end his trip further afield in Canada, home to a large Indian diaspora.

Modi is seeking to attract investors as he tries to rewrite India's reputation as a tricky place to do business - beset by bureaucracy, corruption and a stringent tax regime.

The government has already relaxed rules for foreign investors, eager to create work for the millions who enter India's job market each year.

"Our main challenge is to create jobs for the young - 800 million Indians are less than 35 years old," he told Le Figaro.

While Modi was quick to meet US President Barack Obama and Asia's top leaders after his election last May, it has taken him nearly a year to travel to Europe.

Still, trade between India and the EU as a whole has grown from 28.6 billion euros (S$41.5 billion) in 2003 to 72.7 billion euros in 2013, and both sides are keen for the upswing to continue.