Under the deal, Lockheed will shift its Fort Worth, Texas plant to India without directly affecting American jobs, a campaign pledge of Trump who has vowed to put "America First".
The deal announced during the Paris Airshow between Tata Advanced Systems Ltd (TASL) and Lockheed Martin is ideally suited to meet Indian Air Force's single-engine fighter needs.
According to defence experts, the Air Force needs around 200 medium weight category aircraft.
The announcement of the deal comes a week ahead of PM Modi's meeting first bilateral meeting with Trump after the billionaire tycoon became the president of the US in January.
The agreement was signed by Sukaran Singh, CEO of TASL, and George Standridge, vice president of Strategy and Business Development, Lockheed Martin Aeronautics. Ratan Tata, Chairman Emeritus, Tata Sons, and Orlando Carvalho, executive vice president of Lockheed Martin Aeronautics, were also present.
The two companies said this unmatched US-Indian industry partnership directly supports New Delhi's initiative to develop private aerospace and defence manufacturing capacity in the country under the 'Make in India' initiative.
"This agreement builds on the already established joint venture between Lockheed Martin and Tata and underscores the relationship and commitment between the two companies," said N Chandrasekaran, chairman of Tata Sons.
F-16 production in India supports thousands of Lockheed Martin and F-16 supplier jobs in the US, creates new manufacturing jobs in India, and positions Indian industry at the centre of the most extensive fighter aircraft supply ecosystem in the world.
"Lockheed Martin is honoured to partner with Indian defence and aerospace leader Tata Advanced Systems Limited on the F-16 programme," said Orlando Carvalho, executive vice president of Lockheed Martin Aeronautics.
"Our partnership significantly strengthens the F-16 'Make In India' offer, creates and maintains numerous new job opportunities in India and the US, and brings the world's most combat-proven multi-role fighter aircraft to India," he said.
The Lockheed Martin-TASL F-16 partnering agreement builds on TASL's proven performance manufacturing airframe components for the C-130J airlifter and the S-92 helicopter.
With more than 4,500 produced and approximately 3,200 operational aircraft worldwide being flown today by 26 countries, the F-16 remains the world's most successful, combat-proven multi-role fighter ever produced.
Lockheed Martin claims the F-16 Block 70 is the newest and most technologically advanced F-16 ever offered. And TASL, a Tata Group firm, is focused on providing integrated solutions for Aerospace, Defence and Homeland Security.