India has cleared a $1.2 billion deal to buy 500 air-to-air missiles from European firm MBDA as it undergoes a major programme to modernise its military, defence ministry officials said Thursday.

The cabinet committee on security, chaired by Prime Minister Manmohan Singh, passed the deal on Wednesday as part of a previously-announced package to upgrade India's 51 Mirage 2000 planes, a senior ministry source told AFP.

The overall $2.4-billion Mirage package was approved in July last year, with the French firms Thales and Dassault Aviation signed up for work expected to last 10 years.

Two aircraft have already been flown to France for upgrades and the rest will be modernised at state-run Hindustan Aeronautics facilities in India.

India is also expected to decide shortly between rival bids from France's Dassault and the Eurofighter consortium for a $12 billion fighter jet deal.

The contract is for the outright purchase of 18 combat aircraft with another 108 to be built in India with options to acquire more.

The country is upgrading its military with hardware worth tens of billions of dollars focused on its long-standing tensions with regional rivals China and Pakistan.