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India's arms imports to touch $30 bn by 2012: Assocham

delhi Updated: Aug 16, 2009 18:49 IST

India's arms imports are expected to touch $30 billion by 2012 even as the domestic defence market is poised to grow to $700 million in five years, according to an industry lobby report.

The report submitted to the defence ministry by the Associated Chambers of Commerce and Industry (Assocham) said: "India's arms imports alone would rise to $30 billion by 2012."

"The Defence Offset Facilitation Agency (DOFA) and the armed forces in consultation with India Inc should work out a comprehensive strategy to ensure that defence imports happen at extremely competitive rates," Assocham president Sajjan Jindal said.

DOFA, under the Department of Defence Production, is a single window agency to implement the government's defence offset policy.

Assocham has urged the government to allow India Inc to participate in defence deals as the domestic defence market would expand to over $700 million in four-five years.

According to the chamber, if the Indian economy grows at a steady rate of 7 per cent, the defence spending would exceed 3 per cent of the gross domestic product (GDP) in future.

"This could be used to finance additional capital outlays for modern equipment," the Assocham report said.

Currently defence expenditure accounts for around 2.5 per cent of the gross domestic product (GDP). India has upped its defence expenditure by 34 per cent to Rs 141,703 crore ($28 billion) for the fiscal 2009-10.

India is the world's largest importer of defence articles with its armed forces buying over $6 billion worth of military hardware every year.

The paper also called for raising the foreign direct investment (FDI) limit in the defence sector to 49 per cent from the current 26 per cent.

Higher FDI will help procurement of latest technologies as per provisions of the latest defence offset policy, Assocham said.