The Indian Government wants to end talks with German negotiators on a possible $10 billion (£5.09 billion) deal to sell Eurofighter Typhoons to its air force so that it can start discussions with the British instead, defence sources said.

The Indians are understood to have told defence officials that BAE Systems and the Ministry of Defence (MoD) should take over the negotiations from EADS and the German Government. India is considering whether to buy the Eurofighter as part of a programme to replace 126 Soviet-made jets. It is set to announce a shortlist of candidate aircraft next month and if Eurofighter makes the cut, BAE and the MoD will be asked to step in to continue the talks, replacing the Germans.

Eurofighter is a consortium of three companies representing four nations: BAE in the UK, EADS representing Germany and Spain, and Allenia, of Italy. They take turns to negotiate export orders and, at present, EADS Germany is dealing with the Indian Government.

The Indian Air Force has close links with the MoD, which is training 75 Indian pilots, and the country has also bought Hawk training jets from BAE. If BAE does take over the Eurofighter talks it would confirm India as an important new market for the company.

Mike Turner, the chief executive of BAE, said yesterday that he expected India to be added to the company's existing six “home” markets of the UK, the United States, Sweden, Australia, Saudi Arabia and South Africa.

India's rapid growth is expected to lead to a significant increase in its defence budget as the country replaces old Soviet-era equipment.

India has traditionally bought military equipment from Russia but it is now considering more sophisticated Western weaponry. Its search for a new fighter jet, for example, is determined by its need to have a machine capable of beating Pakistan's F16s.

All big defence companies have identified India as a potentially lucrative new market, but BAE has the advantage of the UK's historic and military ties to the Indian Armed Forces.

BAE has formed joint ventures with Indian companies to gain access to the market. It is working with Wipro, the software firm, to develop flight control systems and with Mahindra Defence to develop an Indian armoured vehicle.

Mr Turner said: “We are determined to go forward in India and eventually we see it becoming another of our home markets.”

However, Mr Turner said that BAE's traditional home market in the UK would see defence projects being delayed as the Government imposes budget cuts. BAE does not expect any large projects, including the new £4 billion aircraft carriers, to be cancelled outright but they may be pushed back to save money. The company reported a 14 per cent increase in sales last year to £15.7 billion and operating profits were up 11.6 per cent to £1.2 billion.

Howard Wheeldon,a senior strategist for BGC Partners, said: “There is concern about defence cuts in the UK but they will not hurt as much as in the past because BAE has grown so rapidly in other more robust markets.”

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