Increasing budgetary allocation for armed forces, the army's replacement of old equipment, and compulsory sourcing of Indian components by foreign defence equipment vendors are among the drivers for India's strategic electronics industry, a defence official said Thursday.

"In 2009, the defence electronics sector revenue was Rs.9,000 crore up from Rs.6,000 crore logged in 2008. The defence electronics sector accounts for around six percent of the total Indian electronics market," said I.V.Sharma, Bharat Electronics Ltd director (research and development), at the 98th Indian Science Congress held at the SRM University campus in Kattankulathur near here.

Strategic electronics consists of radars, underwater electronics, communication equipment, electronic warfare equipment, electro-optic equipments, homeland security solutions, satellite communication and others.

According to Sharma, the country's defence outlay is going up by around 10 percent every year and India is one of the top ten global spenders on defence.

"The defence capital expenditure is expected to go up as many of the in-service equipments have to be replaced or upgraded," he said.

Referring to the government's policy of allowing 26 percent foreign direct investment in defence equipment production, Sharma said foreign companies are planning joint ventures with Indian companies which, in turn, would increase the size of the overall industry.

Further, the offset policy - making foreign defence equipment vendors source 30 percent of the contract value if their order value exceeds Rs.300 crore - would also spur domestic production of electronics for defence sector, Sharma said.

Citing the development of Akash missile as a trend setter of public-private partnership, he said the partnerships for research and production of systems will enhance the strategic electronics output.

Stressing the importance of strategic electronics sector, Avinash Chander, director of the Defence Research and Development Organisation's Advanced Systems Laboratories, said the electronics for the missile system offers many new challenges and opportunities for electronics designers, academia as well as industry.

According to Electronics Corporation of India Ltd chairman Y.S.Mayya, the country should leverage wisely the opportunities in the defence electronics to develop home-grown products and intellectual properties.

Citing the electronics developed for the Indian nuclear power sector indigenously, he stressed all these gains should not be lost now.