The British and Indian governments have agreed to step up their military cooperation.

Following a meeting of the Indo-UK Defence Consultative Group in New Delhi on Tuesday, officials from both governments agreed that cooperation was now at "a new high".

The move comes despite India's controversial decision to test detonate a nuclear bomb and its continuing stand-off with Pakistan in Kashmir.

The agreement came as foreign secretary, Jack Straw, continued his visit to the region. Straw later returned early to the UK as his father was taken seriously ill.

The Indian delegation was headed by Yogendra Narain, defence secretary, while the UK delegation was led by Sir Kevin Tebbit, the permanent under secretary at the Ministry of Defence.

The talks covered a wide range of issues, including global security, international terrorism, peacekeeping and the current situation in Afghanistan, along with improved bi-lateral ties.

"The excellent atmosphere in which they were held reflects the increased closeness and warmth of the relationship," said a joint press statement.

The two governments agreed that Indian observers would be present at four military exercises being carried out this year, while a Nimrod aircraft would be deployed to an Indian base for training purposes.

There will also be an increased emphasis on cooperation in developing military equipment, with British companies now able to own 26 per cent of joint ventures in India.

But both countries pledged to "monitor closely the progress of export licence applications" although there was no deal on the purchase of British jets by the Indian Air Force.

"The DCG looks forward to an early conclusion to the current negotiations with regard to the Indian Air Force requirement for an Advanced Jet Trainer," said the statement.

The Indo-UK Defence Consultative Group holds an annual meeting to review all aspects concerning the defence relationship between the two countries.

The previous meeting was held in London in July 2000.