India and the European Union have agreed to expand trade and political ties at a New Delhi summit led by British Prime Minister Tony Blair and Indian Prime Minister Manmohan Singh. India has also announced plans to buy 43 aircraft from European producer Airbus.

After two hours of talks led by the British and Indian leaders, the European Union and India signed an agreement that officials say will lead to greater cooperation on issues such as trade, security, technology and climate change.

British Prime Minister Tony Blair, who holds the rotating European Union presidency, called the agreement a "turning point" in relations between India and Europe.

"The joint action plan that we have agreed today puts the relationship between the European Union and India on a new and a higher and a more intensive level. That is in my judgment long overdue, and it is important now that it happens," he said.

Indian Prime Minister Manmohan Singh was also optimistic that Wednesday's agreement will lead to a deepening engagement with Europe, which is India's largest trading partner.

"It sets the signposts for the way ahead for our interaction with the European Union, so that we may realize the full potential of our multi-dimensional cooperation," he said.

Both sides say enhanced trade will be at the heart of this new relationship. An indication of that came from Mr. Singh, who announced India's plans to buy 43 aircraft worth $2.2 billion from the European aircraft consortium Airbus.

Mr. Blair called the deal a "welcome sign" of developing trade relations between the two sides. The British leader is accompanied by a delegation of European business leaders, who are eager to explore opportunities in India's rapidly expanding economy.

The two sides say they will work together to overhaul international trade rules, find clean energy sources, and cooperate on anti-terrorism measures such as limiting money laundering.

Mr. Blair also said he would urge next week's U.N. summit of world leaders to condemn strongly all those who incite or encourage terrorism, and send out a "clear and unified" message that terrorism will not be tolerated.

The British and Indian prime ministers are due to hold bilateral talks on Thursday.