BANGALORE, India (AFP) - Indian Prime Minister Narendra Modi vowed on Wednesday to end India's status as the world's No. 1 defence importer, saying he wanted 70 per cent of hardware to be manufactured domestically by the turn of the decade.

Speaking at the start of a major aviation industry conference, Mr Modi told hundreds of foreign and local businessmen that his government would favour domestic companies when awarding defence contracts as part of a larger push to boost India's manufacturing sector.

"We have the reputation as the largest importer of defence equipment in the world," the Prime Minister said at the biennial Aero India show in the southern city of Bangalore. "That may be music to the ears of some of you here. But this is one area where we would not like to be No. 1."

"We are reforming our defence procurement policies and there will be a clear preference for the equipment manufactured in India."

India, which has long been the world's largest buyer of defence equipment, is in the midst of revamping its ageing military hardware and recently lifted a cap on foreign investment in defence.

But while his right-wing government has pledged to push forward with planned military purchases that stalled under the previous centre-left Congress administration, Mr Modi is also determined that the ramp-up in firepower is not at the expense of the domestic defence industry.

Mr Modi said he wanted domestically made equipment to account for 70 per cent of the procurement budget within five years, up from the current 40 per cent, in what he said would be a major boon to the economy.

"A nation with a strong defence industry will not only be more secure. It will also reap rich economic benefits," said Mr Modi.

"Nearly 60 per cent of our defence equipment continues to be imported and, we are spending tens of billions of dollars on acquisitions from abroad," he said.

"There are studies that show that even a 20 per cent to 25 per cent reduction in imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India."

The five-day air show, which is held at an air base on the northern outskirts of the city, attracts the bosses of hundreds of aviation and defence firms, including Boeing and the French firm Dassault.