New Delhi Defense Spending: Does the Indian Military Need a Facelift? Mustafa Quraishi/AP A man examines an assault rifle manufactured by Israel Weapons Industries (IWI) at the 7th International Land and Naval Defence Systems Exhibition in New Delhi, India, Sunday, April 1, 2012 At the bi-annual defense show in New Delhi this week, India was, as usual, being wooed. In one pavilion, a British colonel made a show of taking a sip of water, demonstrating a filtration technology that the U.K. is trying to sell to India's military and humanitarian market. In another, officials pointed out to reporters that the Eurofighter Typhoon war plane, a front runner for the multi-billion dollar deal that India ultimately signed with the French Rafale, was still very much on the table. Just in case India changes its mind. With an estimated $80 billion to burn on military modernization over the next three years, India has become of the world's most lucrative markets for players in the global defense industry, whose customers in the west are suffering from budget cuts amidst slowing economies. But this year's expo was not just about importing more military might: For the first time, the spoken and unspoken word out at the massive convention center - as well as on the posters of individual companies - was about partnering with India to help increase its own arms production. While a recent report by a Swedish think tank revealed that India has now surpassed China to become the world's largest arms importer, India is now eyeing a place on the export list. Whether through export or import, India's military could definitely use a facelift. In a letter from Army chief V.K. Singh to Prime Minister Manmohan Singh that was recently leaked to the Indian press, Singh described the state of the Indian army as "alarming." In the letter, which has created a political storm in the country over the past few weeks, Singh writes that the Indian army's air defense system is "97 percent obsolete" and the tanks are "devoid of critical ammunition to defeat enemy tanks." MORE: Will New Delhi Allow its Troops in Kashmir to Face Prosecution? At current levels of around 2% of GDP, India's defense spending is much less proportionally than that of its neighbors, a situation that some experts say needs to change. We have territorial disputes with countries. There is instability in Pakistan and Afghanistan. We have considerable internal issues," says Anit Mukherjee, a Delhi-based strategic affairs expert. I think to deal with unforeseen outcomes we need to think about investing in our own capabilities. Some of India's neighbors aren't so sure. A 2010 Deloitte study projected India's arms procurement to rise from $41 billion today to $120 billion by 2017. In this year's defense budget there was a 17% leap in spending - a spike that has not escaped the attention of Pakistan. In an opinion piece published on March 12 in the Pakistani daily, the Nation, Khalid Iqbal, a former assistant chief of air staff of the Pakistan Air Force said India is sending the "wrong message" to its neighbors and trying to intimidate Pakistan through its military build-up. "Pakistan does not want to indulge in an arms race, but India's military preparations cannot be ignored," Iqbal warned. If Pakistan was to increase its defense expenditure this year, it would be by compulsion and not by choice. PHOTOS: India Goes on Strike At home, some wonder whether India, which houses almost half the world's poor, should be spending so much on its defense procurement. Critics have argued that some of the funds going to defense could be diverted to address myriad social problems. "Military spending gets 2% of the GDP, but health and family welfare get only 0.34% and education only 0.73%," P.M. Mathew, a Bangalore-based professor of economics argued in a post-budget opinion piece in the DNA newspaper in March. But others call the "butter or guns" argument a false choice. "I don't think it's an either-or situation," says Mukherjee. Economic development at the cost of defense needs can prove extremely expensive. India's shift to focusing defense spending on domestic production, rather than imports alone, is relatively new. In January 2011, New Delhi released its first Defense Production Policy (DPrP) that set out the defense ministry's agenda for supporting a domestic defense-industrial base. Around the same time, the government said it would bring down import dependence from 70% to 30% over the next ten years. A little over a year later, Defense Minister A.K. Antony told reporters at the Expo that indigenization was "gaining speed," and almost 40% of the India's armament and equipment is now being made in the country. The policy's proponents argue that a domestic military supply chain will ultimately help save money and lives. "The Indian armed forces will continue to require equipment which is not outdated, which is of good quality, and which can hold out for decades to come," says Rumel Dahiya, deputy director general of the Institute of Defense Studies and Analyses (IDSA). You cannot keep depending on your foreign supply, especially during crises. But with advanced economies cutting their defense budgets and looking for affordable options, India - and its potential business partners at the Expo - have also spotted an opportunity. "India has tremendous research capabilities and very capable scientists," says Hugh Thomas, head of the India desk at the UKTI Defense & Security Organization. There are massive export opportunities out there with global spending on security on the rise. The UKTI Defense & Security Organization will soon be working with scientists from India's state-owned Defense Research and Development Organization (DRDO) to come up with new defense technology. Established in 1958, the DRDO been the driving force behind India's technological innovations in the defense sector, and in April is expected to begin the first phase of a highly-advanced, multibillion-dollar indigenous infantry system aimed at transforming India's infantry soldiers into fully networked, digitized, and self-contained fighters. After 25 years, India has finally caught up with the rest of the world's military technologies, says W. Selvamurthy, scientist and chief controller of R&D at DRDO. Now it is time for us to make a leap. PHOTOS: India Celebrates Its 63rd Republic Day