The Asian country, which has long been a major trading partner for the Russian defence sector, had planned the biggest arms contract of the century, ordering 126 mid-range multipurpose fighters at a cost of more than $10 billion.
But the MiG bid was shot down by the French Rafale and the Typhoon Eurofighter, built by an Italian-British consortium.
And apart from the immediate loss of business, the news provokes fears that the Russian jet might now be a hard sell elsewhere in the world.
Russia had good grounds to believe the MiG-35 would win the contract, Kommersant reported.
Analysts at home and in India pointed to competitive prices and proven combat experience, while Moscow had sold Delhi the Admiral Kuznetsov aircraft carrier and leased a nuclear submarine to the Indian navy in recent years.
Indeed, Russia was so confident that the MiG-35 would triumph that it did not send representatives to the Aero India 2011 airshow in Bangalore.
But on Thursday night Rosoboronexport, Russia’s military export company, received an official rebuff from India’s defence ministry, with a detailed 14-point breakdown of the flaws in the offer.
Fighter project grounded?
The knock-on effects could go far beyond merely the loss of one contract: landing the India deal would have kept the jet’s price tag down, enabling Russia’s Defence Ministry to buy up to 100 fighters on the (relatively) cheap.
However, that contract has not been signed, and if missing the Indian money pushes the plane’s price up it could force military bosses to reconsider.
Technology analyst Konstantin Makiyenko told Vedomosti that the blow might even see MiG forced into a merger with Sukhoi, which is currently promoting its Superjet-100 passenger craft to civil airlines.
As well as rejecting the MiGs, India also turned down proposals from US firms Boeing and Lockheed Martin.
But backing Euro technology – which is almost twice as expensive as the Russian offer – could be part of a longer-term strategic project.
Vinay Shukla of the Press Trust of India told Kommersant that India wanted to develop its own light fighter jet.