The Government's controversial decision to continue giving money to India, a nation that has more billionaires than the UK and an aid programme of its own, is directly linked to developing trade and investment opportunities, a senior minister admitted yesterday.

With surprising bluntness, the International Development minister, Andrew Mitchell, said the decision to spend £1.2bn over the next five years was part of a broader partnership that included the hoped-for sale of fighter jets to India.

"It's an important market, and for our children and grandchildren, it will be an even more important market," Mr Mitchell told journalists in Delhi. Since the Department for International Development (Dfid) announced earlier this year the results of a review of its overseas aid programme, the Government has come under fire for continuing to give money to a nation with a space programme, an economy growing at more than 7 per cent and the resources to offer aid to countries overseas itself. Dfid has argued that hundreds of millions of people in India continue to survive on less than a £1 a day and it says Britain's aid is precisely targeted.

Mr Mitchell said half of the aid money would go towards developing public-private partnerships. The first of these was launched yesterday, with Mr Mitchell announcing a tie-up with the Industries Development Bank of India, aimed at helping the poor gain access to financial services.

Last year, the Prime Minister, David Cameron, visited India with the aim of securing jobs and investment back home. Since then, Britain has seen its exports to India increase by 45 per cent and one potential deal officials are anxiously following is the sale of 126 fighter jets to Delhi. The EuroFighter Typhoon, made by a consortium including Britain's BAE Systems, is one of two jets that have made the shortlist for a deal worth about £6.6bn. Asked about the strategic goals of Britain's aid programme to India, Mr Mitchell said: "It's about everything I have just mentioned. The focus... is also about seeking to sell Typhoon. The relationship is a relationship you have to take in the round."