He said indigenisation in the field of defence equipment manufacture should have started three decades back but regretted that it had not happened and as a result India became the largest importer of military hardware.
"We have a disturbed neighbourhood and for 68 years we have allowed situation to slip...India lives in the middle of disturbed neighbourhood. In 68 years of our Independece we had several wars. We had it on two fronts," said Jaitley while addressing the students of Shri Ram College of Commerce here.
Underlining the need for enhancing the military capabilities of the country, the Defence Minister said, "Our defence prepareness is the best gurantee for peace in the area. Unless we are prepared, there will no peace in (India)."
Jaitley, who also holds the Finance portfolio, said India is the largest buyer of weapons in world and this situation needs to be changed.
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"Today, a large part of international diplomacy is about business and commerce," he said.
Talking about his experience after becoming Defence Minister, he said, "I had upteem number of visitors in the last three months. We discussed various issues...Their real objective is to sell aircraft or tanks or weapons to India..."
Jaitley said India will have to open to rest of the world and also build its own capacity. "This is something we should have started 30 years ago. There is huge need to go ahead."
The new government has laid thrust on encouraging domestic defence manufacturing and to help this, it has raised the FDI cap from 26 per cent to 49 per cent.