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(Recasts with speech)
* Osborne refers to 250 billion-pound defence deal
* Will unveil details of rupee currency export guarantee
* Announces investments in Britain by Indian companies
By Swati Bhat
MUMBAI, July 7 (Reuters) - Britain's finance minister GeorgeOsborne praised India's new prime minister Narendra Modi onMonday for helping create a quick turnaround in investorsentiment, during a two-day trip aimed at opening upopportunities in defence and infrastructure.
Along with most western nations, Britain shunned Modi foryears after he was accused of not doing enough to stop religiousriots that killed hundreds in his home state of Gujarat in 2002,when he was its chief minister.
But London was one of the first to break ranks and sendofficials to meet Modi before the election he won in May.
The ruling Conservative Party-led alliance now wants tobuild on that goodwill with the visit by Osborne and ForeignSecretary William Hague. Both ministers are due to meet Modi inNew Delhi on Tuesday.
"Prime Minister Modi is seeking more investment in India'seconomy - and I want British companies to provide it, and theBritish government to support it," Osborne said.
An efficient administrator who oversaw fast economic growthin Gujarat, Modi is feted by business and his election successhas triggered a series of records for Indian stocks, despite thelong economic downturn he inherited.
Modi denies accusations he was complicit in the Hindu-Muslimriots that killed at least 1,000 people. A Supreme Courtinvestigation did not find evidence to prosecute him.
Speaking in the financial capital Mumbai, Osborne saidBritain had concluded a 250 million-pound deal to supply defenceequipment to the Indian Air Force and highlighted a 1billion-pound investment by Diageo in Indian distilleryUnited Spirits.
Indian officials were not immediately able to say whatdefence deal he was referring to.
London is hoping a stalled deal for India to buy 126 FrenchRafale fighter jets may yet collapse, perhaps opening the doorto a new arrangement involving the Eurofighter Typhoon jet,which is partly built in Britain.
It also wants British firms to help India develop new urbancentres along a 1,000-km (600-mile) corridor between Mumbai andBangalore.
Osborne said he would give details on Tuesday of a newmechanism to offer guarantees for rupee-denominated exportfinance, part of British assistance he said was aimed at makingthe rupee an international currency. The Indian rupee is notcurrently a fully convertible currency.
COURTED BY THE WEST
The arrival of the two senior British ministers was thelatest in a series of high-profile visits by foreign governmentsscrambling to repair relations with Modi - who won a landslidevictory in May - and to position themselves for a possiblefurther opening up of India's defence industry.
Britain's economy, the world's sixth largest, is expandingat one of the fastest rates in the Western world. But thecountry is weighed down by large public debts and Prime MinisterDavid Cameron has said it needs to forge closer links withdeveloping economies such as India's to secure its future.
"We want British firms ... to help develop your new roads,railways and ports, and our defence and aerospace companies tohelp bring India more cutting-edge technology, skills and jobs,"the two ministers said in a jointly-authored column in the Timesof India newspaper on Monday.
Osborne announced research and development investment inBritain for electric vehicles by automotive giant Mahindra andpharmaceutical company Cipla to the tune of 20 millionpounds and up to 100 million pounds respectively.
A long-festering tax dispute involving Vodafone isexpected to be on the agenda in meetings with the government.
India's foreign minister Sushma Swaraj will discuss thesituation in Iraq, where 39 Indians have been taken hostage, aswell as nuclear negotiations between world powers and Iran whenshe meets Hague on Tuesday, a ministry spokesman said.
The visit could have an impact on Britain's political scene.Cameron is up for re-election next year and his Conservativesare anxious to woo the country's Indian diaspora, which Haguebefore his trip estimated was 1.5 million-strong.
In 2013, Britain exported goods and services worth 7.7billion pounds to India and imported goods and services fromIndia worth 8.8 billion pounds.
Britain, India's former colonial power, is the third biggestinvestor after Singapore and Mauritius. But, the two Britishministers wrote in the Times of India, it sells less to Indiathan it does to Switzerland. (Additional reporting by Andrew Osborn and Limei Hoang inLondon; Writing by Frank Jack Daniel; Editing by Andrew Roche)
