British defence giant BAE Systems has chosen India's Mahindra group to build a plant to assemble howitzer artillery guns it hopes to sell to the Indian military, the two companies said Wednesday.

The Indian government is in discussions to buy 145 of BAE Systems' M777 ultra-lightweight howitzer guns through the US government's Foreign Military Sales programme.

BAE's appointment of a local partner may help to finalise the deal, which would be worth about $700 million and enable India to boost its army's artillery along its high-altitude frontiers.

New Delhi is seeking to update its ageing military hardware with new kit worth tens of billions of dollars in the face of long-standing tensions with regional rivals China and Pakistan.

"As a founding partner of defence manufacturing in India, BAE Systems is pleased to partner with Mahindra on our offer to develop an Assembly, Integration and Test facility in India," Joe Senftle, a vice president at BAE Systems, said in a statement.

Prime Minister Narendra Modi has said he wants foreign manufacturers that win lucrative hardware deals to invest in India by partnering with local firms.

"We look forward to making a major contribution to our defence forces and economy of India," said S.P. Shukla, group president of Mahindra Defence and Aerospace.

The companies have not specified when or where the assembly plant would be built.

Modi has vowed to end India's status as the world's number one defence importer, saying he wants 70 percent of hardware to be manufactured domestically by the turn of the decade.

India last purchased howitzers for the army in 1986, when it bought 410 field guns from the Swedish arms giant AB Bofors.

The Bofors deal became mired in corruption allegations and cost then Congress Prime Minister Rajiv Gandhi the 1989 national elections.