New Delhi- The Indian Air Force (IAF) admitted that it will be difficult for it to tackle a combined threat from China and Pakistan, raising questions about the country's ability to fight a two-front war, said a report published in Hindustan Times. The IAF has told an Indian Parliamentary panel that Pakistan would certainly fish in troubled waters if China were to launch offensive operations against India. However, IAF stressed that China may not pose "a collusive threat" if hostilities were to break out between India and Pakistan. Setting off alarm bells, a senior IAF officer informed the Parliamentary standing committee on defense that a "collusive threat" from China and Pakistan would be difficult to tackle but the air force was prepared for it. "We have made plans in case of contingency-III (two-front war)," he said, adding that India had upgraded its policy against China from dissuasion to deterrence. The IAF currently operates 34 fighter squadrons, against a desirable 42. In a report tabled in Parliament on Tuesday, the panel asked the IAF to scale up its capabilities by speeding up the acquisition of 126 French Rafale fighters, a deal worth Rs. 120,000 crore. The panel flagged concerns about poor border infrastructure on the Indian side, at a time when China has ramped road, rail and air connectivity across the line of actual control (LAC). The panel warned that the pace of China's military modernization and infrastructure development had affected the "strategic balance" between the two countries. "Our defense forces must develop the capability to fight a multi-front war," the panel said. India is years behind the Chinese military with the neighbor currently outnumbering the country's combat power by a 3:1 ratio. India's hopes to bridge the gap in the next 15 years hinge on availability of funds. Finance minister P Chidambaram on Monday announced that the defense budget for 2014-15 had been hiked from Rs. 203,672 crore to Rs. 224, 000 crore, a 10% increase over last fiscal's outlay. However, the meager increase in the capital expenditure could halt the modernization plans of the armed forces. The capital outlay has been increased from Rs. 86,740 crore to Rs. 89,587 crore in the interim budget for 2014-15, a hike of barely 3.2%. China's official, but underreported, defense budget for 2013-14 stands at Rs. 594,000 crore.