NEW DELHI (PTI): The capital budget of the Indian Army should be increased to facilitate enhancing its deterrent capacity to ward off challenges from the two "hostile" neighbours, a parliamentary panel said on Tuesday in an apparent reference to Pakistan and China.

The committee appreciated the efforts made by the Defence Ministry towards indigenisation of military platforms and hoped that the country would see "100 per cent contract value" going to Indian vendors in the years ahead.

Referring to the challenges before the Army, the parliamentary standing committee cited proxy wars, in an apparent reference to Pakistan-backed cross-border terrorism in Jammu and Kashmir.

The committee was of the view that funds slated for modernisation of the Armed Forces should always be incremental.

"The committee also desired that there should be a separate allocation for committed liabilities and new schemes, under the modernisation/ capital budget," it said.

The report of the panel was tabled in Lok Sabha on Tuesday.

"Our expenditure should be in proportion to the increase in defence spending of our neighbours. Therefore, the committee recommended that the capital budget of the Army should be increased to have a deterrent capacity to ward off at least two hostile neighbours," it said, in an indirect reference to Pakistan and China.

The committee noted that the capital outlay for the Navy for 2023-24 was projected at Rs 52,804.75 crore.

"Against this projection, the committee found that this year's allocation is pragmatic and supportive for the Navy as the ministry actually allocated the same amount as projected, although, this projection is Rs 14,818.21 crore less than the projection it made in the year 2022-23," it said.

"This also indicates that the requirements of the Navy for the new scheme have decreased, and gone down which may affect its modernisation drive. The committee recommended to be apprised of the reasons for the lower projection in comparison to last year," the panel said.

The committee recommended that from next year onwards a separate statement of the net budget be provided after taking into account the inflation, noting that it is a recurring and unavoidable phenomenon in all aspects of economic theory which applies to the Navy also.