NEW DELHI : India's JSW Steel and South Korea's POSCO plan to invest 650 billion rupees ($7.73 billion) in their proposed plant in India in the coming years, sources said, part of efforts to capitalise on rising steel demand in the world's fastest-growing major economy.

Last week, JSW Steel and POSCO signed an agreement to set up an integrated steel plant with an initial capacity of 5 million metric tons a year. The plant will be in the eastern state of Odisha, known for its iron ore reserves.

They did not give financial details of the agreement, but sources familiar with the matter said they will initially invest 200 billion rupees in the plant, which one source said should be set up by next year.

Total investment will reach $7.73 billion after three years of operations as the companies raise production capacity to 18 million metric tons, the sources added. They did not wish to be named as they were not authorised to talk to the media.

Neither JSW Steel nor POSCO immediately responded to Reuters' emails seeking comments.

Rapid economic growth and increased infrastructure spending have turned India into a global hotspot for steel demand growth, even as demand tapers in Europe and the U.S. India's steel demand touched a seven-year high in the April to August period.

Some of the world's big corporations have turned to India to diversify their supply chains, fuelling a boom in manufacturing and construction. As companies set up new factories and warehouses, India's steel demand has surged.

In a further fillip to steel demand, the Indian government, along with private companies, plans to spend $12 billion building new airports and expanding existing ones as it seeks make air travel more accessible and affordable.

The sources said the proposed JSW Steel and POSCO plant would produce hot-rolled, cold-rolled, and galvanised steel.

A few years ago, POSCO scrapped plans to build a $12 billion steel plant - billed as India's biggest foreign direct investment at the time - due to difficulties in acquiring land for the project.

It operates a cold-rolled, galvanized steel mill in India's western state of Maharashtra, supplying automotive grades to the country's leading automakers.

($1 = 84.08 rupees)