Indian fighter jets pounded mock enemy bunkers close to the Pakistan border on Sunday in a symbolic show of air power at a time when the two nuclear-armed rivals are trying to improve relations.
The exercise was watched by military attaches from about 30 countries but not Pakistan and China, neighbours who would be keen to take a look at India's military firepower.
It follows the first official talks between India and Pakistan since the militant attacks in Mumbai in 2008.
The talks ended with an agreement to keep in touch, signalling relations remain fraught despite a desire to reopen a dialogue that India suspended after the Mumbai killings.
"This is not just a firepower demonstration but a clear message about what India's air force is capable of," said Uday Bhaskar, a New Delhi-based strategic affairs expert. "It is a message to the neighbours."
Tensions between India and Pakistan are a problem by themselves but the stakes have risen further with their roles in the war in Afghanistan.
In Sunday's war games, planes including Sukhois and MiG 21s, roared through the sky, bombing simulated enemy targets including militant training camps and bunkers.
President Pratibha Patil and Defence Minister A.K. Antony watched as targets were hit with bombs and rockets, raising huge balls of fire and dust in the deserts of Pokhran, the site of India's nuclear testing facility.
Defence officials said the exercise would test the air force's ability at precision bombing of militant camps, particularly those behind enemy lines.
India accuses Pakistan of letting militant groups use its territory to train and launch attacks on India, such as the Mumbai raid that killed 166 people.