The deal comes after India said it would need 110 combat jets, worth about $15 billion, to bolster its defences.

Boeing has offered to build the jets locally to comply with Prime Minister Narendra Modi's "Make-in-India" campaign, which aims to cut imports and build a domestic defence industry.

India, the world's biggest arms importer, is in the midst of a multi-billion dollar upgrade of its largely elderly military equipment.

"Our partnership with HAL (Hindustan Aeronautics Ltd) and Mahindra will enable us to optimise the full potential of India's public and private sector to deliver next-generation F/A-18 fighter capabilities," Pratyush Kumar, president of Boeing India, said in a statement.

Under the deal, Boeing will build a production facility in India where other fighter jets could also be built.

Boeing is competing with Lockheed Martin of the United States, Sweden's Saab and Dassault of France to supply fighter jets to the Indian Air Force.

Lockheed is partnering with Tata Advanced Systems to build single-engine F16 fighter planes in India. Saab has said it will build its planes with India's Adani Group.

India has said the jets must be produced by a foreign aircraft maker with an Indian company under a strategic partnership deal that brings high-tech defence technology to India.