"We therefore, need to maintain conventional forces adequately supplemented by credible deterrence, Gilani said while addressing here at the soft launch of IDEAS-2010, here at the Pakistan National Council of Arts,
He said Pakistan will continue to develop its military potential that guarantees peace with dignity and honour.
The prime minister said Pakistan has been able to do so by significantly developing indigenous capabilities for production of sophisticated weapon systems and equipment.
"Our military capability is basically for deterrence while we yearn for peace. We believe that military weakness invites aggression from stronger nation but we do not wish to be dragged in an arms race as we seek to invest in socio-economic well being of our people."
Gilani expressed satisfaction that after meeting the domestic requirements, country's defence industry has now moved towards marketing products at the international level.
"Our arms, ammunition and more complex products like tanks and other armoured vehicles, air-launched munitions and aircraft related technology, are of world class standard."
He said the defence industry though primarily geared to meet requirements of Pakistan Armed Forces, has the great potential to export its products on competitive basis through responsible arms trade.
"We have also opened up this sector for public-private partnership and both foreign and local investors can take advantage of this opportunity."
The prime minister said on the internal front, "we will have to ensure that the process of extensive reforms to strengthen the state institutions and democracy continue unabated."
He said there were strong reasons to believe that government's socio-economic initiatives will help marginalize the extremist elements that thrive in an environment of ignorance.
Gilani said Armed Forces of Pakistan were battle hardened and known for their professionalism, the world over.
"Our contribution to the UN's peace keeping mission and our performance around the global is a clear manifestation of devotion to duty and skills to use any equipment."