The very reason why India is increasing its diplomatic reach and presence in East is to counter the Chinese threat. The Look East policy is only because of this. Now you simply can't counter your adversary with weapons, diplomacy and politics is equally important. We have seen the same in Doklam crisis.
Now coming to weapons part, as I said earlier, we are working on present and clear danger as of now. Our impetus is on to counter the sub surface leg of PLAN which is making its way into our territory and we have been able to contain it to a large extent in past couple of years. As of the surface leg of PLAN, the idea is to restrict them outside our territory right now. So again the diplomatic reach to countries like Japan, Vietnam, Thailand, Indonesia and even Taiwan is to hold the surface ships in SCS.
Coming to increasing the rate of production and indigenous content. Even if we achieve 100% capability, we would not go for it. The reason is both Political as well as Economic.
Politically, the arms market and tech is what attracting the whole P5 & Russia to us. The moment we start substituting their components with ours, our clout or importance would start declining. Look at US, although they have a thriving weapon industry and R&D, they are still using armaments from NATO countries and Israel. Even they have set up JV with many leading arms manufacturer from these countries. Politically it is a tool to make friends and keep them close to you. Same with us. Replace the whole Russian and Israeli arms with indigenous ones or break the JV and you would simply loose an ally.
Economically, the moment you start producing all by yourself, you would start stretching your economy. Arm industry is dynamic industry where every other day one tech is getting replaced by other. So its just not the end product which matters, its the R&D behind that product which would cost you a bomb. For that you would have to increase the budget manifolds which in turn would stretch and put pressure on other aspect of your nation. Especially a country like India don't have that luxury. So buying products which are already available off the self is better then producing each and every product. Even other countries follow the same path.
Another thing is to take note of your absorption capability. If we consider PLAN and IN, the rate of production for PLAN is second to none as of now, but absorption rate is also second to none from below.
@binayak95 would be able to show you the real operational aspect of PLAN. Although quantity itself is a quality, but quality does matter a lot in itself.
So bottom line is, we should increase our rate of production from what it is right now. But saying that we should replace everything with indigenous is a disaster in itself.