Soldiers from China and India on duty at the Nathu La Pass on the Sino-Indian border. [Photo/Xinhua]

BEIJING - The Indian Defense Ministry's latest annual report says it is "watchful" of China's increasing military capabilities, but experts said such concerns are unnecessary.

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The ministry's 2010-2011 report said: "India is conscious and watchful of the implication of China's evolving military profile in the immediate and extended neighborhood," United Press International reported on Monday.

The report also sent a clear signal by acknowledging China to be of "crucial importance".

The Indian government's policy is to interact with China based on the principles of "mutual trust and respect and sensitivity for each other", the report said.

Such mixed signals point to India's stance of wanting to keep promoting its military development while not hurting its ties with one of its most important neighbors, said Hu Shisheng, a South Asia studies expert at the China Institutes of Contemporary International Relations.

But there is no need for India to worry because the development of military capabilities is "natural", and in fact, a stronger defense capability could on some level help create a healthier China-India relationship, he said.

"A stronger India can gain more confidence, thus developing smoother and more mature bilateral ties with China."

The ministry's annual reports have listed China as one of its major potential concerns in recent years, though Pakistan remains India's primary adversary.

India has been rapidly increasing its military budget and broadening its military deployment near the disputed border with China.

Data released recently by the Stockholm International Peace Research Institute showed India has replaced China as the world's top arms importer, receiving 9 percent of international transfers from 2006 to 2010, with Russian deliveries accounting for 82 percent of India's arms imports.

The data does not necessarily mean that India's military is growing faster than China's, Hu said, adding that Western countries' relatively looser policies on arms exports to India than to China had a role to play.