UPDATE 2-British PM on India trade trip as graft scandal erupts

* Cameron is making second Indian visit as PM

* Hopes India may consider Eurofighter if French deal fails

* EU states clamouring to boost trade relations with India

* Bribery scandal engulfs Anglo-Italian helicopter deal

By Andrew Osborn

MUMBAI, Feb 18 (Reuters) - British Prime Minister DavidCameron flew into India on Monday promising to try to reviveIndian interest in the Eurofighter even though New Delhi haschosen a French-made rival and as a graft scandal is engulfingan Anglo-Italian helicopter deal.

Making his second visit to India as prime minister,Cameron's trip comes days after a similar trade mission byFrench President Francois Hollande, underlining how Europe'sdebt-stricken states are competing to tap into one of theworld's fastest-growing economies.

Cameron's delegation, which includes representatives of morethan 100 companies, is the biggest taken abroad by a Britishpremier and includes four ministers and nine MPs.

But the timing of the trip is not ideal. India said onFriday it wanted to cancel a $750 million deal for a dozenhelicopters made by AgustaWestland, the Anglo-Italian subsidiaryof Italy's Finmeccanica, over bribery claims.

That will not make Cameron's job of persuading India to buymore civil and military hardware easier, and Indian officialshave told the local press they intend to press Cameron for "afully-fledged report" on what Britain knows about the scandal.

Britain has said it wants to wait until the end of theItalian investigation before commenting in full, but has givenIndia an interim report on the subject.

"This is something for the Italian and Indian authorities todeal with and I'm sure they will," Cameron told reporters onMonday, saying issues had been raised that needed to be settled.

Cameron said he would tell the Indian government that theEurofighter jet, which is partly built in Britain, remains anattractive option if India decides to review a multi-billiondollar deal to buy 126 French-made Rafale fighters. New Delhirejected the Eurofighter last year.

"(Eurofighter) Typhoon is a superior aircraft," he said,adding that the consortium that built it had said it would "lookagain" at the price. Such a deal could involve technologytransfer and industrial participation, he said. "I will makeclear the Typhoon is still available."

A British government source said on Friday that London hadnoted that Hollande hadn't finalised the Rafale fighter jet dealduring his own trip.

"LEADING PARTNER"

Cameron told his hosts they should open up their economybecause Britain had done the same for Indian firms. He said hewas proud of the fact that Indian companies like Tata group, theowner Jaguar Land Rover, had such a strong foothold in theBritish economy, but said he expected a reciprocal arrangement.

"Britain is an open economy and we encourage thatinvestment," he said. "I think, in return, we should be having aconversation about opening up the Indian economy, making iteasier to do business here, allowing insurance and bankingcompanies to do more foreign direct investment."

India still had outdated rules and regulations, Cameroncomplained.

Investors have been clamouring for years for India to openup Asia's third-largest economy to more foreign investment. Buttheir entreaties have been resisted by Indian opposition groupsworried about potential damage to home-grown businesses.

At a time when Britain's government is struggling to get itseconomy growing, officials see India, projected to become theworld's third largest economy by 2050, as a key strategicpartner in what Cameron has called a "global race".

"India is going to be one of the leading nations in thiscentury and we want to be your partner," Cameron told Indianworkers at Hindustan Unilever Ltd.

Companies travelling with Cameron include BP, BAESystems, De La Rue, Diageo, EADS UK, HSBC, JCB,Lloyd's, the London Stock Exchange, London Underground,Rolls-Royce and Standard Chartered.

COLONIAL PAST

Cameron's visit to India, which won independence fromBritain in 1947 and whose colonial history remains a sensitivesubject for many Indians, will take in Mumbai and New Delhi.

Cameron says the two countries enjoy a "specialrelationship", a term usually reserved for Britain's ties withthe United States, but it is a relationship undergoing profoundchange. For now, Britain's economy is the sixth largest in theworld and India's the 10th. But India is forecast to overtakeits old colonial master in the decades ahead.

In a nod to how the relationship is evolving, Britain willstop giving India aid after 2015.

Cameron is expected to lobby India to do more to allowforeign retailers such as Britain's Tesco to openstores in the country.

New Delhi changed the rules last year to allow foreignchains to operate in India but attached policy riders includingobligations over local sourcing, mandatory investment in localinfrastructure and restrictions on what goods could be sold.

India is forecast to spend $1 trillion in the next fiveyears on infrastructure and Britain is hoping its firms may winsome of those contracts.

Cameron said he wanted British firms to help India developnew cities and districts along a 1,000 km (600 mile) corridorbetween Mumbai and Bangalore, generating investment projectsworth up to $25 billion.

Some British companies have run into problems in the past.Mobile phone operator Vodafone has repeatedly clashed with theIndian authorities over taxes and oil company Royal Dutch/Shell has asked the British government to raise a tax disputeit has with India during Cameron's visit.

He will meet his Indian counterpart, Manmohan Singh, as wellas the Indian president. His office said business deals thatwill be announced during the trip would create 500 British jobsand safeguard a further 2,000.