New Delhi: Noting that China has upgraded its military force projection against India through rapid modernisation, the Defence Ministry on Monday said the country was "conscious and watchful" of Beijing's rising military profile in the immediate and extended neighbourhood.

In its annual report for 2011-12 released on Monday, the Defence Ministry said Pakistan continued to be a "cause of concern" due to undiminished activities of terror organisations there.

"Chinese footprints in India's neighbourhood are increasing progressively due to its proactive diplomacy through political, military and economic engagements.

"Rapid infrastructure development in Tibet and Xinjiang has considerably upgraded China's military force projection against India and improved their overall strategic and operational flexibility," the Ministry said in its report.

The report said "India remains conscious and watchful of the implications of China's profile in the immediate and extended neighbourhood."

The report said the Army is "fully seized" of the security scenario and has "identified" strategically important infrastructure requirements along the Line of Actual Control (LAC) and they are being developed in a phased manner.

The report said India has been desirous of cordial relations with China and "to this end, a policy of positive engagement and maintaining peace and tranquillity along the LAC is ensured".

On the Pakistan front, the report said that a prosperous Pakistan was in the best interest of India but the "existence of terrorist camps across the India-Pakistan border and continued infiltration attempts along the Line of Control (LoC) continue to pose a threat".

The Ministry said although the unresolved boundary dispute between the two countries has been a factor in India's security calculus, New Delhi has a "strategic and cooperative partnership with China".

It said the effort has been to work on areas of mutual interest which would enable both countries to pursue common goals of growth and development.

China has been investing heavily in infrastructure development along the Indian borders. With a defence budget of more than USD 106 billion, almost three times that of India, China has built a network of rail lines and more than 58,000 km of roads in the Tibet Autonomous Region (TAR) along with nuclear missile silos.

Five airfields in TAR have become operational and include Gongar, Linchi, Pangta, Hoping and Gar Gunsa.

In response to the enhanced Chinese military activity, India has also started building its capabilities to meet the security challenges. The steps include the raising of two Mountain Divisions of the Army in the northeast, deployment of four squadrons of its frontline Su-30 MKI fighters. Besides, it is also considering deployment of Ultra Light Howitzers (ULHs) and light tanks in the territories along the LAC.

Several new and old air fields have been activated and new roads constructed to enable a quicker movement of troops and equipment in the region. On Myanmar, the Ministry said the Government there has assured that it will not allow its territory to be used for anti-India activities.