(Corrects Monday to Tuesday in paragraph 8)
* France proposes credit line across 3 years for India
* More discussions still needed to tie up Rafale fighter jet purchase
* Dwindling European defence budgets drive ambition to deal with India
* French minister invites Indian PM Modi to visit France
NEW DELHI, July 1 (Reuters) - France has proposed to give India a 1 billion euro ($1.4 billion) credit line to fund sustainable infrastructure and urban development projects, Foreign Minister Laurent Fabius said on Tuesday.
The credit line would be available over three years and would be delivered through the French Development Agency, Fabius, who began his India visit on Monday, told reporters in New Delhi.
India, which has said it needs $1 trillion of investment by 2017 to upgrade its creaking infrastructure, is keen to attract foreign development agencies and companies to help finance new roads, railways and cities. Prime Minister Narendra Modi, who took office in May, has vowed to focus on infrastructure.
"If you don't have the share of technology and the share of finance, you can develop brilliant ideas, may be brilliant, but (you will have) nothing concrete," Fabius said at an event about sustainable growth and climate change.
He is the first of a string of Western politicians due to visit India over the next few weeks for talks with Modi and his government, drawn in part by the prospect of lucrative defence deals that stalled under the last administration.
After meetings with ministers in Modi's cabinet on Monday, Fabius expressed confidence that there would be a "positive outcome" to negotiations on a $12-billion deal to sell Rafale combat aircraft to India.
The deal to supply 126 Rafale fighter jets manufactured by Dassault Aviation has been under final negotiations since January 2012 after they pipped the Americans, Europeans and Russians. The contract, which involves technology-sharing and the production of most of the planes in India, has been making slow progress through numerous stages of vetting and evaluation.
The French minister sounded less upbeat on Tuesday after meeting Modi, declining to say when the deal might be concluded.
"The next step is for Dassault and the (Indian) government to discuss the details which have not yet been discussed and hopefully to reach a conclusion," he told news agency reporters. "For us, the earlier the better ... but it's a normal negotiation and the way it must be."
Fabius said Paris was keen to share technology and industrial development with India in the defence sector.
"To be honest and candid, you have a diminution of the defence budget in Europe ... and therefore (it is in) our interest, it's not only the interest of India," he said.
Fabius, who flew on from New Delhi to India's financial capital, Mumbai, said Modi had accepted an invitation to visit France, and Paris was hoping he would stop there on his way to or from a visit to the United States in September.
Some countries find extending a credit line or investing through development arms a useful way to boost ties with India and also gain an early link to the South Asian nation's future infrastructure schemes.
Japan is a key investor in the Delhi-Mumbai Industrial Corridor, a mega infrastructure project that envisages dozens of new industrial zones and cities sprouting alongside a 1,483-kilometre highway stretch between India's biggest two cities ($1 = 0.7345 euros) (Reporting by Shyamantha Asokan, Tommy Wilkes and John Chalmers; Editing by Jacqueline Wong and Ron Popeski)