"Because of shortage of money, don't expect this (financial) year any decision or agreement," said Defence Minister AK Anthony at a press conference in Delhi.
The announcement means the French company Dassault will face new uncertainty in its most promising export market.
India's financial year runs until the end of March but elections are expected by May and Anthony's Congress Party is struggling in the opinion polls.
In December Dassault lost a contract in Brazil worth more than five billion euros. A contract which was under negociation for a decade.