Britain was stunned this month when New Delhi announced a big contract to buy French warplanes instead of the UK-backed Eurofighter Typhoon, despite intense efforts by the British government to boost trade.

Angry lawmakers then stepped up pressure on Cameron to axe the more than 1-billion pound ($1.6-billion, 1.2-billion euro) aid budget for India after reports that the Indian finance minister described the handouts as 'a peanut'.

Cameron -- who led a huge business delegation to India soon after taking office in 2010 -- has pledged to press New Delhi to reverse its decision on the warplanes.

"I'm very disappointed by what has happened in India, but Eurofighter is not out of the contest and we need to re-engage as hard as we can," Cameron told parliament this week when questioned about the deal.

The fighter jets setback was particularly bruising as it came during a war of words between France and Britain over the strength of their economies.

Downing Street meanwhile insisted that its aid commitments to India would remain unchanged despite the furore. "The government has always been very clear about sticking to its aid commitments and the fact that it would not balance the books on the backs of the poorest people in the world," a spokesman said.

But the handouts to Asia's third-largest economy have sparked anger at home, where austerity measures are biting as Britain tries to curb a record budget deficit.

Cameron's Conservative-led coalition government has committed 280 million pound aid a year for five years until 2015 for the impoverished Indian states of Bihar, Madhya Pradesh and Orissa.

Stoked by the jet debacle, the issue flared up last weekend when British media republished quotes from 2010 by Indian Finance Minister Pranab Mukherjee dismissing the aid. "It is a peanut in our total development (expenditure)," the Sunday Telegraph quoted Mukherjee as telling parliament.