British Prime Minister David Cameron is facing growing calls to cut huge aid handouts to India after a series of perceived snubs from the former jewel in the crown of London's colonial empire.

Britain was stunned this month when New Delhi announced a big contract to buy French warplanes instead of the UK-backed Eurofighter Typhoon, despite intense efforts by the British government to boost trade.

Angry lawmakers then stepped up pressure on Cameron to axe the more than £1-billion ($1.6-billion, 1.2-billion euro) aid budget for India after reports that the Indian finance minister described the handouts as ‘a peanut’.

Cameron - who led a huge business delegation to India soon after taking office in 2010 - has pledged to press New Delhi to reverse its decision on the warplanes.

"I'm very disappointed by what has happened in India, but Eurofighter is not out of the contest and we need to re-engage as hard as we can," Cameron told parliament this week when questioned about the deal.

The fighter jets setback was particularly bruising as it came during a war of words between France and Britain over the strength of their economies.

Downing Street meanwhile insisted that its aid commitments to India would remain unchanged despite the furore.

"The government has always been very clear about sticking to its aid commitments and the fact that it would not balance the books on the backs of the poorest people in the world," a spokesman said.

But the handouts to Asia's third-largest economy have sparked anger at home, where austerity measures are biting as Britain tries to curb a record budget deficit.

Cameron's Conservative-led coalition government has committed £280 million aid a year for five years until 2015 for the impoverished Indian states of Bihar, Madhya Pradesh and Orissa.

Stoked by the jet debacle, the issue flared up last weekend when British media republished quotes from 2010 by Indian Finance Minister Pranab Mukherjee dismissing the aid.

"It is a peanut in our total development (expenditure)," the Sunday Telegraph quoted Mukherjee as telling parliament.

Conservative lawmaker Philip Davies said Britain should not be paying aid when India was spending billions of pounds on defence and on its space programme.

"In those circumstances, it would be unacceptable to give them aid even if they were begging us for it. Given that they don't even want it, it would be even more extraordinary if it were to be allowed to continue," he said.

International Development Secretary Andrew Mitchell said the comments were ‘out of date’, and that claims of corruption involving aid did not involve British funds.

"Our completely revamped programme is in India's and Britain's national interest. It is one part of a much wider relationship between our two countries," he said.

The trade side of that relationship is one that Britain has been very keen to promote.

In 2010, bilateral trade grew 20 per cent to £13 billion and Britain says it wants to double that by 2015. India is also Britain's largest non-European export partner.

India is increasing investment in Britain, with Indian-run companies such as the car maker Tata - which took over the Jaguar Land Rover luxury car brand in 2008 - and steel group Arcelor Mittal investing in Britain.

In 2010 Britain attracted 97 new projects from India generating 6,096 jobs, according to British government figures.

For its part, India, which gained independence from Britain in 1947, said it was grateful for the aid.

"Relations between India and UK are warm and friendly and have stood the test of time," a statement from the Indian Ministry of Foreign Affairs said last week.

"India appreciates cooperation extended by UK in a number of areas, which have contributed to India’s overall development efforts... The bilateral cooperation between India and UK has been and remains mutually beneficial."