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Washington and New Delhi have largely agreed to the terms of a new agreement that allows the two militaries to use each other's land, air and naval bases for resupplies, repair and rest.
However, US troops can be in India only on the invitation of the government of India and the agreement isn't binding on either nation.
The new pact - whose text has not yet been finalised - addresses India's earlier concerns about losing its traditional autonomy and being perceived as having entered a military alliance with the US.
India, the world's biggest arms importer, wants access to US technology so it can develop sophisticated weapons at home -- a key part of the PM's "Make in India" campaign to boost domestic manufacturing.
The negotiations on this trip are focusing on the transfer of technology for new generation aircraft carriers to be built in India, jet engines, and helmet-mounted displays for pilots.
The US is also hoping to sell its F-16 or F-18 fighter jets to India as part of a major co-production deal involving more than 100 planes which would be manufactured in India in collaboration with an Indian partner company.
Secretary Carter told NDTV that the recent sale of US F-16s to Pakistan, which India strongly objected to, was based on the assumption that the fighter jets will be used for counter-terrorism operations."We strongly believe in curbing terrorism originating in the territory of Pakistan and we fully recognize that that has affected India in incidents that we deplore," he told NDTV.
The US is keen on working with India to counter China's growing assertiveness in the South China Sea but has clarified that at the moment, it is not considering joint patrolling by an Indo-US fleet in the area.
However, both sides will work closely together in the Indian Ocean, the two sides agreed.