India's top engineering and construction firm Larsen & Toubro Ltd. (L&T), has signed a memorandum of understanding (MoU) with Raytheon for the U.S. firm's medium multi-role combat aircraft program that will help develop superior defense technology for India's military forces.

L&T and defence contractor Raytheon will develop technology for Indian military forces and explore business opportunities, L&T said in a statement.

L&T has worked closely with Indian defense establishments in developing and putting into production a range of advanced systems, said M.V. Kotwal, Senior Executive Vice President, Heavy Engineering Division, Larsen & Toubro.

Currently we are one of the leading suppliers in the Indian defence space. This new agreement will help us induct superior technology, and expand our range of high-value offerings in the defence sector, Kotwal said.

While Raytheon has conducted business in India for many years, we are now looking to develop our relationship and presence here in a more meaningful way over the long term, said Wes Motooka, Vice President for International Strategy and Business Development for Raytheon Space and Airborne Systems.

India has a strong pool of talent, so it makes perfect sense for us to combine Raytheon's world class technology with the best local expertise as we develop capabilities and solutions to support the nation's emerging requirements, Motooka said.

Other than L&T, the $20 billion Raytheon Group has signed agreements with three other Indian firms, including Wipro, Godrej & Boyce and software firm Data Patterns to collaborate on defence projects.

While L&T and the Tata Group are the two major private sector suppliers that have been catering to the needs of the Indian defence sector for long, competition is hotting up with Godrej, the Mahindras and even software firms like Wipro, TCS and HCL Technologies eyeing the market.

In recent years, foreign military contractors have been rushing to sign agreements with Indian firms in the defence sector. In August, India floated its biggest ever defense tender, inviting foreign players to participate in a $10 billion deal that involves purchase of 126 Multi-role Combat aircraft.

The shortlisted suppliers include US-based Lockheed Martin Corp., world's biggest defense contractor, with their F-16 Fighting Falcons; Boeing Co. with twin engined F-18/A Super Hornets, French Dassault with Rafale fighters, Swedish SAAB AB's Gripen JAS-3, Eurofighter Typhoon and Russian Aircraft Corporation's just unveiled Mig-35.

India ranked as the 10th biggest military spender in the world in 2006, according to the Stockholm International Peace Research Institute Web site.

According to Finance Minister P. Chidambaram, India will raise its defense budget for the current fiscal year by 12 percent to $24 billion. Of the proposed spending, $10.5 billion will be used for arms purchase, Chidambaram was quoted as saying in his 2007 Budget speech.

Headquartered in Waltham, US, the Raytheon Group is a technology leader specialising in defence, homeland security and other government markets throughout the world. With a history of innovation spanning 85 years, Raytheon provides state-of-the-art electronics, mission systems integration and other capabilities in the areas sensing; effects; and command, control, communications and intelligence systems, as well as a broad range of mission support services.