German Defence Minister Franz Josef Jung and his Indian counterpart Pranab Mukherjee signed the accord after a meeting at the defence ministry here Wednesday evening.
The accord provides for training and exchange of senior personnel as well as creation of a higher defence committee that will hold alternate annual meetings in India and Germany.
Mukherjee said the committee would be assisted by subcommittees that would identify specific areas of cooperation, which can be expanded in the interests of each country.
The Indian minister said the aim of the accord was 'to expand relations from the level of a buyer-and-seller relationship to that of co-production and the transfer of technology'.