India increased Thursday its defense expenditure for the fiscal year 2004-05 by 27 percent, allocating Rs. 77,000 crore (around 16.74 billion US dollars) for the sector, largely with an eye on several big ticket arms deals presently in the pipeline.

There was approximately 60 percent hike in the allocation for "capital expenditure", parlance for funds provided for arms purchases, from Rs. 20,953 crore (around 4.57 billion US dollars) in 2003-04 to Rs. 33,483 crore (around 7.31 billion US dollars) inthe current fiscal, the Indo-Asian News Service (IANS) reported.

In the national budget for 2004-05 presented in the Lok Sabha (Lower House of parliament), Finance Minister Palaniappan Chidambaram proposed an increase of Rs. 11,700 crore (around 2.55 billion US dollars) over the allocation of Rs. 65,300 crore (around 14.51 billion US dollars) for defense in fiscal 2003-04.

Chidambaram presented a Rs. 477,829 crore (around 103 billion US dollars) national budget that continues with economic reforms while harmonizing it with the unmet needs of rural India.

He noted that the increased allocation for defense expenditure was largely for concluding several major defense deals to modernize the armed forces.

"The allocation for 'capital expenditure', parlance for funds provided for arms purchases, would be hiked from Rs. 20,953 crore (around 4.57 billion US dollars) to Rs. 33,483 crore (around 7.31 billion US dollars)," IANS quoted Chidambaram as saying.

"As promised in the national Common Minimum Program, the government is determined to eliminate all delays in the modernization of the defense forces," he said.

"Having regard to the trend of defense capital expenditure in recent years, it has become necessary to make a higher allocation this year."

India has recently inked several major defense contracts, including a 1.5 billion US dollars deal with Russia to acquire theAdmiral Gorshkov aircraft carrier and a 795-million pound (around 1.3 billion US dollars) deal with Britain's BAE Systems to purchase 66 Hawk advanced jet trainers.

It has also clinched a deal with Israel for three Phalcon airborne early warning radar systems worth 1 billion US dollars.

The sharp hike in India's defense budget came almost a month after Pakistan increased defense spending by 20 percent for fiscal2004-05.

However, in spite of a heavy hike, India's defense expenditure still forms only 2.5 percent of the Gross Domestic Product (GDP).

India has 1.2 million-strong military, the worlds fourth-largest.