Negotiations to buy the planes have been stalled for three years on New Delhi's insistence on assembling a portion of the planes in India.
But Defence Minister Jean-Yves Le Drian has told media after Modi's announcement that all 36 jets have been manufactured in France.
Negotiations continue on finalising the initial 126-jet agreement, the value of which is estimated to have grown to about 19 billion euros from an initial 11 billion.
The deal for 36 jets, announced by Modi alongside French President Francois Hollande at the Elysee palace, could be worth about 4 billion euros.
The order is manufacturer Dassault's largest yet abroad. Paris announced the sale of 24 Rafale jets to Egypt in February.
The deal also reflects urgency in the world’s fourth largest air force to upgrade itself. India needs 45 active squadrons with 18 planes in each to close a capability gap up with China and Pakistan. But 14 of its 25 existing fighter squadrons will start retiring from 2017.
Modi has vowed to strengthen India’s military, particularly the air force which is armed with obsolete Soviet-era planes. Forty-nine French Mirage-2000 jets joined the fleet in the mid-1980s but a quarter of them face shortages of spares.
Jean-Paul Betbeze, chief economic adviser for Deloitte Capital France, tells RFI that while the Egypt deal and tensions in the Middle East may have helped break the three-year deadlock, the deal could be the result of concerns India is being outpaced by China.
France and India were also expected to discuss nuclear deals during Modi's two-day visit, such as the establishment of six EPR reactors in Jaitapur, in Maharashtra state. French nuclear giant Areva is still awaiting the go-ahead to instal the reactors five years after a bilateral civil nuclear accord.