 "India, France eye pact to seal Rafale deal: Hollande")
India's Prime Minister Narendra Modi has been trying to attract French companies to India and to share high technology in defence and other fields as part of a bid to promote local industry and build a domestic manufacturing base.
In the run-up to Hollande's visit, Indian and French negotiators on Friday debated the price of 36 combat planes designed to replace ageing Indian air force jets, officials of the two nations said.
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"The idea we have in mind is one of an intergovernmental agreement between the two countries in order to allow the firms involved to go all the way," Hollande told journalists.
"It is this intergovernmental agreement that will allow a commercial transaction," said Hollande.
The French leader, speaking in Chandigarh on the first day of a state visit to India, said such an agreement was a prerequisite for the Indian side. He did not elaborate.
Hollande will be the guest of honor at India's Republic Day parade on Tuesday, a sign of the deepening political and commercial ties between the two countries.
India and France are also discussing a plan by French nuclear company Areva to build six reactors in western India, as part of a push to ramp up nuclear capacity.