The announcement would see India join an elite club of countries that have such military capabilities - with the US, Russia and Israel. It came just days after Pakistan tested a cruise missile capable of carrying nuclear weapons.

India's top military scientist, Dr VK Saraswat of India's Defence Research and Development Organisation, said: "If I keep quiet and wait for [a missile] to fall on my city and then start sending my own deterrent missile ... a lot of damage is done. It is essential you have a system which will first take on that kind of a threat.

"Because we have a ballistic missile defence system ... a country which has a small arsenal will think twice before it ventures," he added, in an apparent reference to nuclear-armed rival Pakistan.

Last week the Indian military demonstrated its missile defence systems by shooting down a warhead off its east coast. Saraswat said that within three years, major cities such as Delhi and Mumbai would be under a protective shield.

India is also beefing up its armoury. It has announced a nuclear-capable missile with a range of 3,700 miles - far enough to hit Beijing or Rome.

Analysts say Pakistan's rapid build-up of short- and medium-range missiles is of special concern to India despite an ongoing peace process between the two.

K Subrahmanyan, a writer on defence issues, said that India needed to raise the "uncertainty levels for Pakistan".

"Pakistan is acquiring advanced missile technology from China. No missile defence system is perfect, but if we can knock out three out of every five warheads, it means our adversary has to fire more rockets. It is a means of deterrence."

Analysts in Pakistan say such thinking is hastening an arms race. "The first impulse is to ask how does Pakistan get [a missile defence system]," said Ayesha Siddiqa, a defence analyst. "The next will be to increase the number of missiles to make sure it has enough to evade the shield."

Other countries are also racing to develop "Star Wars" technologies. This year, after Tokyo saw North Korea test ballistic missiles and conduct a nuclear test, Japan's parliament authorised $2.5bn (£1.3bn) to develop a missile defence system. The US, which has run 36 missile defence tests since 2001, has authorised an annual spend of a half a trillion dollars on a missile shield.

There are no indications of the cost of the Indian missile defence system, but many analysts say there are better uses for India's money. "The US can afford such follies, but a developing country like India cannot," said Bharat Karnad from Delhi's Centre for Policy Research. "We should be getting more missiles, not finding ways of shooting them down."