Recasts throughout to add details from government statement

NEW DELHI, Feb 12 (Reuters) - India on Thursday gave initial clearance for a 3.6-trillion-rupee ($40 billion) boost to the country's armed forces, including procurement of more Rafale fighter jets for the air force and Boeing P-8I reconnaissance aircraft for the navy.

Heightened tensions with its neighbours, including Pakistan, have pushed India's military to modernise.

The air force's fighter squadron strength has shrunk to 29 in recent months, well below the 42 it had earlier. Its workhorse MiG-21 was retired in September and other early variants of the MiG-29, the Anglo-French Jaguar and the French Mirage 2000, are also set to end service in the coming years.

New Delhi has long relied on importing machinery and weapons for its armed forces, but a recent push by Prime Minister Narendra Modi has helped boost domestic manufacturing.

For the Indian Air Force, this era began in the 1980s but was fruitful only in the last decade when the locally produced Tejas fighter jet was introduced to replace Soviet-era MiG-21s.

Hindustan Aeronautics HIAE.NS $(HAL)$ has nearly 180 of the advanced Mk-1A variants of the Tejas on order domestically, but has yet to begin deliveries due to engine supply chain issues at GE Aerospace GE.N.

The defence ministry said the Defence Acquisition Council had given the initial nod for more Rafale fighter jets and missiles for the air force, anti-tank missiles for the army and P-8I reconnaissance aircraft for its navy.

The total value of all these proposals stands at 3.6 trillion rupees, the statement said. It did not elaborate further.

The approvals come ahead of a visit by French President Emmanuel Macron to India next week. The Indian Air Force's fleet currently includes Rafale fighters from Dassault Aviation AM.PA.

In April, India signed a deal for 26 Rafale-Marine twin- and single-seat jets to be deployed on its two carriers: INS Vikrant and INS Vikramaditya.

Separately, the defence ministry on Thursday also signed a deal with HAL to buy eight Dornier 228 aircraft for the coastguard.

The proposals pave the way for commercial and technical details to be finalized soon.

Earlier in the day, local media reported that the DAC had given its approval to buy 114 Rafale fighter jets from Dassault for 3.25 trillion rupees.

($1 = 90.5780 Indian rupees)

(Reporting by Delhi Newsroom; Editing by Thomas Derpinghaus and Toby Chopra)