* Talks hampered by pricing of technology transfer * Rafale likely to be discussed on Hollande's India visit on Thursday * France unsure about technical capacity of Indian aerospace company * Officials say deal could be finalised by July By Manoj Kumar and Nigam Prusty

India's defence minister warned of budget cuts on Wednesday as he opened the country's air show with a sobering message for global defence groups used to years of lavish spending. Referring to efforts to reduce the budget deficit caused by slowing economic growth and higher spending on subsidies, A.K. Antony said the government of India, the world's leading arms importer, was "passing through difficult days". "The whole government is facing some financial problems, so we need to tighten in all areas for a better future," he said.

India, the world's leading importer of weaponry, opened one of Asia's biggest aviation trade shows Wednesday with Western suppliers eyeing lucrative deals and a Chinese delegation attending for the first time. Air Vice Marshal Zheng Yuanlin was heading a five-person group at the five-day Aero India show after New Delhi extended a formal invitation to China in January. "They've confirmed their attendance," defence ministry spokesman Sitanshu Kar told AFP late on Tuesday. "It's the first time India has invited a Chinese delegation from Beijing."