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NEW DELHI—India on Friday signed a contract to purchase 36 Rafale fighter jets from Dassault Aviation SA for 7.8 billion euros ($8.7 billion), the French company's biggest-ever deal as it tries to outmaneuver its U.S. rivals in the global combat-plane market.

An intergovernmental agreement was signed by Indian Defense Minister Manohar Parrikar and his French counterpart Jean-Yves Le Drian, an Indian government official said. India's cabinet Committee on Security, headed by Prime Minister Narendra Modi, on Wednesday cleared the deal which was more than four years in the making.

"This new contract illustrates the strategic relationship and the exemplary partnership maintained between the two countries and marks the natural culmination of the relationship of trust initiated in 1953 when India became Dassault Aviation's first export customer," the company said in a statement. The Indian Air Force currently operates Dassault's Mirage combat aircraft.

"Rafale will significantly improve India's strike & defense capabilities," a post on Mr. Parrikar's Twitter account said.

A post on Mr. Le Drian's Twitter account described the deal as a "historic decision."

Dassault—which has for years been trying to secure overseas deals—signed contracts with Egypt and Qatar for 24 Rafale jets each last year.

India picked Dassault to provide it with jets in January 2012, a major coup for the company which beat offerings from Eurofighter, Russia's RAC MiG, Boeing Co., Lockheed Martin Corp. and Saab AB. At the time, India was the only foreign buyer for the jet.

A final order has however taken four years of discussions with two successive governments, as the parties grappled over cost and Dassault's refusal to guarantee the performance and quality of the planes if they were assembled as originally planned by India's state-run Hindustan Aeronautics Ltd.

In April last year, India cut the size of the size of the order to 36 jets from 126 and removed a condition that most of them be assembled by Hindustan Aeronautics.

India urgently needs to expand its depleting fleet of combat planes as it faces an increasingly assertive China, and its longtime rival, Pakistan. The air force has been urging the government to expand its fighter jet fleet, much of which is made up of aging planes acquired during the Soviet-era.

The twin-engine Rafale—which has the capability to deliver nuclear weapons—will have features such as advanced electronically scanned array radar, midair refueling and electronic warfare equipment.

All the planes from the latest order will be manufactured in France, with the first jet scheduled for delivery in three years, the government official said.

Write to Santanu Choudhury at santanu.choudhury@wsj.com

(END) Dow Jones Newswires

September 23, 2016 06:25 ET (10:25 GMT)

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