Davies said he had discussed entering into partnerships with Indian companies in the areas of aerospace and advanced security, in which Britain had 'excellence.'

'That is clearly, over the next few years, a huge area of focus for UK Trade and Investment (the government's trade promotion body),' he said.

Moves toward setting up joint ventures in defence were given concrete shape by a visit to Bangalore in February by Richard Paniguian, the head of UKTI's newly-formed Defence and Security Organisation (DSO).

During the visit - his first foreign tour as DSO head, Paniguian said the market for such joint ventures was governments around the world for whom domestic security had emerged as the 'number one priority'.

The threat of terrorism had created a huge potential for 'companies which are at the leading edge of technology, of manufacturing technology, the entire spectrum of homeland security, which includes anything from airport and port detection, right through to high level identification principles'.

Cutting-edge British defence companies that have already set up in India include Rolls Royce, BAE Systems, Cobham and Hampson. Paniguian said he hoped in turn to see many more Indian defence manufacturers gain access to the British market in 10 years' time.

Likewise, the Associated Chambers of Commerce and Industry of India (Assocham) has sought the foreign direct investment cap in India's defence industry to be raised from the current 26 percent to 49 percent.

Assocham argues such a step would allow the government to cut down on its massive arms imports bill and develop a more indigenously-based high-tech defence industry at the same time.