India tells UK: We don't want the peanuts you give us in aid.

FURY over the spiralling overseas aid budget erupted last night after it emerged that Indian leaders wanted to turn down British cash.

Pranab Mukherjee, India's finance minister, dismissed the UK's £280million-a-year aid to his country as"a peanut" that was not necessary to a country with a rapidly-growing economy.

His government backed down only after British officials begged it to accept the cash, according to sources in Delhi.

The revelations intensified criticism of the Coalition's soaring international aid budget, which is due to rise from £8.1billion this year to a massive £11.5billion in 2015.

Tory MP Philip Davies said: "Britain giving aid to India is simply unacceptable. Millions of hard-pressed families will be wondering why the Government is allowing their hard-earned money to be thrown at a country that doesn't even want it."

Emma Boon of the TaxPayers' Alliance, said: "It is incredible that ministers have defended the aid we send to India, insisting it is vital, when now we learn that even the Indian government doesn't want it."

"Britain giving aid to India is simply unacceptable

Tory MP Philip Davies

Critics say the Indian economy is growing by 10 per cent a year and will overtake the UK within a decade. India has even launched an aid programme of its own.

Tensions have been rising after Delhi made a French arms manufacturer the frontrunner to build 126 combat jets for the Indian air force.

The move was a blow to British-based BAE Systems, part of a rival consortium bidding for the £7billion contract. British ministers had claimed that aid could help BAE.

Whitehall sources pointed out that Mr Mukherjee's remarks, previously unreported outside India, dated from August 2010 when he told India's parliament: "We do not require the aid. It is a peanut in our total development exercises [public spending]."

Sources in Delhi said Department for International Development officials told their Indian counterparts that refusing the money would cause"grave political embarrassment" to the British Government, which has handed more than £1billion to India in the past five years and plans to spend another £600million by 2015.

International Development Secretary Andrew Mitchell said: "There are states the size of Britain where half of all children suffer from malnutrition. We will not be in India for ever but now is not the time to quit."