Discussing the issue with visiting UK Prime Minister Theresa May, Modi said he encourages British companies to look at the multiple opportunities in the Indian defence sector.
"Looking beyond trade in defence equipment, I invite them to build partnerships with Indian enterprises that focus on manufacturing, technology transfer and co-development," he said.
A joint statement later said the two Prime Ministers recognised the potential for cooperation in defence manufacturing between UK and Indian companies in the 'Make in India' framework and agreed to encourage and facilitate such cooperation.
The two leaders also tasked the Defence Consultative Group (DCG) on November 15-16 to advance the bilateral defence cooperation agenda, including the UK's proposals for capability partnerships, through a range of activities including military to military cooperation, training, exchange of subject matter experts, research and technology linkages as well as defence manufacturing.
"Noting that ongoing cooperation between HAL and BAE Systems in manufacturing Hawk Advanced Jet Trainers in India as an example of partnership in defence manufacturing, the Prime Ministers agreed to apply innovative approaches to jointly promote products and services into international markets," the statement said.
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