MOSCOW, November 12 (RIA Novosti) - Modernization of the Russian economy is an issue for the country's survival in today's conditions, Russian President Dmitry Medvedev said on Thursday.

"We must start modernizing and technologically upgrading the entire production sphere. This is an issue of our country's survival in today's world," Medvedev said in his state-of-the-nation address to both houses of Russia's parliament.

Medvedev said Russia had to act promptly while lessons had to be learned from the global economic crisis.

While global prices grew, there were illusions that Russia could delay structural reforms. Proposals were made to build up the growth of the old raw material-based economy while decisions on developing a new economy were isolated and few, Medvedev said.

Now Russia has made a decision to raise its development to a new technological level and will also develop new medicinal and space technologies, as well as "radically increase energy efficiency," he said.

He said it is also time for Russia to eliminate its dependence on raw material exports as the country's major revenue base.

"We have to admit that in previous years we failed to do enough to solve problems inherited from the past. We have failed so far to dismiss the economy's primitive structure, the humiliating raw materials dependence and reorient production to peoples' real needs," Medvedev said.

Medvedev added that the habit of living at the expense of raw materials exports continues to inhibit the country's innovation development.

Medvedev also instructed the government to work out measures to improve the country's financial system to meet the needs of the economy's modernization.

Medvedev said ineffective companies must leave the market.

"We are rendering direct support to Russian companies amid the crisis. The volume of this aid has topped 1 trillion rubles [$35 billion]. Further on, we'll support only those companies that have explicit plans to raise efficiency and implement high-tech projects," Medvedev said.