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

New Delhi: India's arms imports are expected to touch $30 billion by 2012 even as the domestic defence market grows to $700 million in five years, according to an industry trade body report submitted to the ministry of defence. The report by the Associated Chambers of Commerce and Industry (Assocham) said: "India's arms imports alone would rise to $30bn 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 set up 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.

The report suggests that should the Indian economy grow at a steady rate of 7 per cent, the defence spending would then 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 report said.

Currently defence expenditure accounts for around 2.5 per cent of the GDP, with expenditure for fiscal 2009-10 pegged at Rs141,703 crore ($28 billion) - up by 34 per cent.

It is suggested that India may currently be the world's largest importer of defence items, with annual purchases of $6 billion worth of military hardware.

The Assocham report also asks for raising 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, the report said.