India, like the United States, has weapons development projects that go on and on, to the point where the weapon is obsolete, but has too many political supporters to allow it to be cancelled. India has a number of these boondoggles, most of them missiles or aircraft. These problems arose when, in the 1980s, India decided to develop and build certain weapons themselves. This kept money and jobs in India, and eliminated dependence on foreigners for these weapons. All good in theory, but in practice, there were major problems.
Take, for example, the Indian attempt to build a jet fighter to replace their Russian MiG-21s. To address this need, in 1983 India began their "Light Combat Aircraft" (or "Tejas") project. Building something better than the 1950s era MiG-21 didn't seem too difficult. But 23 years later, the Tejas is still in development. The aircraft has become something of a zombie project. It can be killed, or really brought to life. Even with 500 test flights, there are still serious problems that prevent putting the aircraft into production. The MiG-21s are still in service, and falling apart. The situation is getting critical.
The good news is that the Tejas will be cheap, costing about $25 million each. The bad news is that most of the key elements of the Tejas development have moved at a glacial pace. The final design was not finished until 1990. The most critical part of the aircraft, the engine, was to have been Indian made, but the "Kaveri" engine, designed and built with Russian assistance, has yet to come together. The Tejas has been flight tested mainly with the American F404 engine, which is also used in the U.S. F-18 and F-117A, and the Swedish Gripen. The Indians finally agreed to collaborate with foreign engine makers, to get the Kaveri engine working. This is what the Swedes did, licensing F404 technology from U.S. manufacturer General Electric, to build their own engine. The Indians currently plan to have the Tejas in service by 2010, even if the initial squadrons have to use American made F404 engines.
The Tejas is smaller than the F-16 and nearly the same size as the Swedish Gripen. Unlike the Gripen, Tejas has less capable electronics and has not been in service for ten years already. India had hoped to export the Tejas, but with competition like Gripen, and continuing problems designing components, it's going to be rough going. Since India only needs a few hundred Tejas, lack of export orders means higher per-aircraft cost (as fewer aircraft absorb the development cost). Thus, there will be charges that it would have been cheaper to buy the Gripen, or Mirage 2000, or even the many second-hand F-16s available, than to develop Tejas. On the plus side, the Tejas project also created an Indian capability to develop jet fighters, including the complex engines. China also found that developing this kind of capability is not cheap, and projects like Tejas are how you pay for your new skills.