Army:
The Army is doing the best as of now. Cool new weapons and technology for infantry, armour as well as SF forces, new transport planes, EW equipment, an awesome new integrated air defence system, a super awesome EW capability and a dedicated comm satellite constellation using the INSAT series. Only disadvantages are infantry equipment and artillery. It still comes first.
Navy:
The navy inductions are just a lot of hype because they are indigenous. But their ships are not the best in the IOR. The Delhi class of destroyers were good, but not anymore. Hopefully, the Kolkata class is not delayed. The new frigates from Russia are really good along with our home made ones. That's about it. Our Submarine fleet su*ks. Navy is always slow to build. But it is the toughest to modernize among the three and it is headed in the right direction. So, in 3 or 4 years the IN will be a completely different force from today. Only has a capable blue water capability in the Indian Ocean. So, it gets the second position.
Air Force:
Except for the Su-30MKIs there is nothing going on in the AF that is worth calling it among the best in the world. The Migs, Mirages and Jaguars are just pulling through, they are not modern enough and not going to be for a few more years. The Jags, Mig-21Bisons and Mig-27s are marginally upgraded and don't pose a radical capability boost. As long as they fly they will do well. AFNET program is still not ready yet and the ODLs are yet to be tested. Many things in the network centric operations are still not ready yet along with their dedicated satellite, the LCA is quite late and the MRCA saga is a never ending story about how Romeo met Juliet but they never frig*ng die. Another force to be reckoned with only after 2012. Until then we are just going to be a "little" better than our adversaries. 2020 is when the IAF will be "awesome" and not before.