India has increased its annual defence spending by 11.6% in a move to modernise the military and counter the growing capabilities of China, Finance Minister Pranab Mukherjee has said.

The military budget for 2011-2012 has been set at Rs1.64tr ($36.28bn), from last year’s Rs1.47tr, of which, the army will receive Rs642.51bn, Nnvy Rs105.89bn, air force Rs159.28bn and DRDO Rs56.24bn.

“More than 40% of the Indian defence budget for 2011 will be spent on capital expenditure, while the rest will go toward maintaining its armed forces,” he added.

The increase in the allocation suggests the government plans to move ahead with the planned defence acquisitions for a more secure northern border and a greater presence in the Indian Ocean.

The arms purchases expected in the upcoming fiscal include the $11bn medium-range multirole combat aircraft (MMRCA) tender for 126 fighter jets, acquisition of 145 ultra light howitzers and 197 advanced helicopters for the IAF and the Indian Army.

Centre for Land Warfare Studies head Gurmeet Kanwal said the country’s security planning was geared towards China, which is expected to announce its defence budget 2011 later this week.