India's government has signed a deal with the central bank to set formal inflation targets for the first time, seeking to end damaging price volatility in the country of 1.2 billion people.

Rising food prices cause huge hardship for India's millions of poor and central bank governor Raghuram Rajan has made controlling inflation a priority since taking the helm of the Reserve Bank of India (RBI), resisting calls to reduce interest rates.

India's ruling Hindu nationalist party was Sunday sworn into government in the country's only Muslim-majority state for the first time after an historic power-sharing deal with a bitter regional rival.

Narendra Modi hailed the partnership between his Bharatiya Janata Party (BJP) and the People's Democratic Party (PDP) as a chance to fulfill the aspirations of a region which has endured a sporadic revolt against Indian rule since 1989.

India's finance minister pledged major investment in infrastructure on Saturday, saying it was time for the economy to "fly", as he unveiled the new right-wing government's first full budget.

Arun Jaitley said his government had inherited an economy dominated by "doom and gloom" when it took power last year, trumpeting its achievements in conquering inflation and kick-starting growth.

A court in India on Friday cleared six men of murdering four people including three British nationals during 2002 religious riots in the prime minister's home state of Gujarat.

At least 1,000 people, mainly Muslims, were killed in a frenzy of communal violence in 2002 in the western state where Narendra Modi was chief minister before he was elected prime minister last year.

Saudi Arabia on Thursday beheaded an Indian axe murderer and a Pakistani heroin trafficker, bringing to 34 the number of death sentences carried out this year.

Vijay Kumar Saleem, of India, was convicted of killing a Yemeni by striking him in the head with the axe, an interior ministry statement carried by the official Saudi Press Agency said.

Hundreds of protesters clashed with police in Indian Kashmir on Wednesday after government forces killed a suspected rebel in a gun battle, police said.

Three soldiers were also wounded in the battle, which began on Tuesday when government forces cordoned off the village of Heff, around 50 kilometers (30 miles) from the main city of Srinagar, where they suspected rebels were hiding out.

French Defense Minister Jean-Yves Le Drian held talks with his Indian counterpart on Tuesday on his second visit to New Delhi in as many months as he tries to salvage a deal to sell 126 Rafale fighter jets.

France is hoping to save the deal, which has been snagged for three years and now faces new questions over cost, before a visit to Paris by Prime Minister Narendra Modi in April.

The United States and regional power India voiced concern after former Maldives president Mohamed Nasheed was forcibly dragged into court to face terrorism charges, and denied legal access and medical treatment.

Nasheed, who was ousted three years ago, was denied bail in a brief hearing Monday after being arrested on what critics have labelled "trumped-up charges" designed to shut down growing opposition to the government of President Abdulla Yameen.

An Indian priest has been freed in Afghanistan eight months after he was kidnapped by unidentified gunmen, Prime Minister Narendra Modi said on Sunday.

Two teenage Nepalese schoolgirls suffered burn injuries after a boy hurled acid at them early Sunday, police said. 

The girls, aged 15 and 16, were admitted to a hospital with burn injuries after the youth attacked them with a bottle of acid.