India's navy chief said on Monday that Beijing's growing maritime strength was a "major, major cause for concern" and pledged to support a state energy firm in its contentious search for oil in the South China Sea.
Admiral D.K. Joshi told journalists that China's push to upgrade its navy was "truly impressive" and said that India had to adapt its own strategy accordingly.
"It is actually a major, major cause of concern for us, which we continuously evaluate and work out our options and our strategies for," Joshi said.
"The modernisation is truly impressive," Joshi added.
China, which put its first aircraft carrier into service in September, has been locked in a series of disputes over strategic islands in the region, including with Vietnam and the Philippines over territory in the South China Sea.
India signed a pact with Vietnam in October last year to expand oil exploration in the South China Sea.
Although Beijing has urged New Delhi not to push ahead with the project for the sake of "peace and stability", Joshi said that the Indian navy was ready to support state energy firm ONGC and had carried out exercises in preparation.
"In certain sectors ONGC Videsh has certain interests. It has energy exploration blocks, three in number, and since it is an area of Indian interest the Indian Navy, should there be a need, would stand by," Joshi said referring to the firm's international subsidiary.
"Not that we expect to be in those waters very, very frequently, but when the requirement is there for situations where the country's interests are involved, for example ONGC Videsh, we will be required to go there and we are prepared for that.
"Are we holding exercises for that nature? The short answer is 'yes'".
The admiral also argued that disputes over freedom of navigation within the South China Sea must be resolved in line with international treaties.
"Not only us, but everyone is of the view that they have to be resolved by the parties concerned, aligned with the international regime, which is outlined in UNCLOS (United Nations Convention on the Law of the Sea), that is our first requirement," he said.
New Delhi is also wary of growing Chinese influence around the Indian Ocean, where Beijing has funded or plans to invest in major infrastructure projects, including ports in Sri Lanka, Bangladesh and military-ruled Myanmar.
China's military budget officially reached $106 billion in 2012, an 11.2 percent increase.
According to a report issued by the Pentagon in May, Beijing is pouring money into advanced air defences, submarines, anti-satellite weapons and anti-ship missiles that could all be used to deny an adversary access to strategic areas, such as the South China Sea.
At a key Communist Party congress earlier this month, outgoing President Hu Jintao urged China to push forward fast-paced military modernisation and set the goal of becoming a "maritime power".
India and China fought a brief border war in 1962 and still have unresolved territorial disputes.
China opposes US bill on island dispute
China on Monday branded a US-Japan security treaty "a product of the Cold War" after Washington reaffirmed its commitment to Japan in its territorial dispute with China over the Senkaku Islands, known in Chinese as the Diaoyus.
The amendment, attached to the National Defense Authorization Bill, noted that while the United States "takes no position" on the ultimate sovereignty of the territory, it "acknowledges the administration of Japan over the Senkaku Islands".
It added that "unilateral actions of a third party" would not affect its position.
The legislation passed last week reaffirmed the US commitment to Japan under the Treaty of Mutual Cooperation and Security and warned that an armed attack against either party "in the territories under the administration of Japan" would be met in accordance with its provisions.
"The Chinese side expresses serious concern and firm opposition to the US Senates's amendment to the National Defense Authorization Act," foreign ministry spokesman Hong Lei told reporters.
"The Diaoyu islands and affiliated islands have been China's inherent territory since ancient times. China has indisputable sovereignty over them."
Hong said the legislation violated Washington's repeated pledge to not take sides in the dispute.
"The US-Japan security treaty is a product of the Cold War and should not go beyond the bilateral scope or undermine the interests of a third party," Hong said.
"We hope the US side will bear in mind the broader interests of peace and stability in the region, honour its words with actions and refrain from sending self-contradictory, wrong signals."
The sovereignty of the islands has been a source of friction for decades, but the row erupted earlier this year after the nationalist governor of Tokyo said he wanted to buy them for the city, forcing the Japanese government to nationalise them.
Chinese vessels have been spotted in and around the territorial waters every day for the last month.
Both sides have publicly refused to back down on their respective claims to the Japan-controlled islands.