New Delhi: At least half of India's defence equipment is obsolete and needs urgent upgrade, a report said Wednesday, underlining gaps in its defence preparedness in a region roiled by militancy and military rivalries.

Only 15 per cent of India's equipment is "state of the art", according to the first comprehensive report on the country's defence sector prepared by global consultancy firm KPMG and the Confederation of Indian Industry (CII).

New Delhi changed its defence procurement policy last year to further open its defence sector to the world and local companies after the Mumbai attacks in November 2008, in which 175 people were killed.

The new report, released by Defence Minister A.K. Antony, says India will have to focus on improving homeland security after the Mumbai attacks and the government needs to support private firms in manufacturing equipment locally. India says it is keen to upgrade its largely Soviet-era arsenal to counter potential threats from Pakistan and China with a series of acquisitions and by phasing out old weapons.

The country has lost nearly 200 Russian-made MiG series aircraft in crashes since 1990.

India wants to increase its air force squadrons from 34 (612 fighters) to 42 (756 fighters) by 2020 with modern aircraft. The Indian army also needs new weapons urgently, the report said.

Bofors Howitzers were the last major acquisition made by the Indian Army way back in 1986, it said.

"The Kargil conflict of 1999 [with Pakistan-based militants in Kashmir] highlighted the shortcomings of equipment held by the Indian armed forces, highlighting the need to modernise the equipment portfolio," the report says.

India is currently the 10th largest defence spender in the world with an estimated 2 per cent share of global expenditure.