"Indian officials say the independent navigation service will aid marine traffic, emergency response officials, vehicle tracking applications, mobile communications, mapping, and civilian drivers."
The requirement of such a navigation system is driven by the fact that access to foreign government-controlled global navigation satellite systems is not guaranteed in hostile situations.
Missiles use satellite navigation to determine their targets. So, relying on external navigation systems is undesirable.
[1] http://en.wikipedia.org/wiki/Indian_Regional_Navigational_Sa...
[2] http://gpsworld.com/novatel-supplies-reference-receivers-for...
https://www.quora.com/Indian-Space-Research-Organisation-ISR...
But, I understand the premise.
Personally I think another angle is important: more competition, hopefully leading to more accurate navigational data streams.
E.g., Imagine every solider fitted with a receiver/transmitter so that their location is known with a resolution of a few feet. Think that'll make it easier to save the wounded during operations?
It's supposed to cost $250 million (approx $25 million per year since it lasts 10 years). Cost seems wildy reasonable considering just the military benefits.
I've seen one of these systems demonstrated, which uses a cigarette-box sized unit with a GPS sensor, GSM modem, satellite transceiver, military radio connector and battery inside. Positions were encrypted and transmitted via least-cost routing to a centralised command and control system, showing the position of each soldier in real-time.
Of course, in real operations it becomes difficult to maintain line-of-sight radio communications over long distances, cellular service is spotty in combat zones and satellite communications are expensive even with small data packets. So the related infrastructure requires careful thinking too.
So I agree with you, this seems a worthwhile investment for the military benefits alone. It's one of the main reasons to have an indigenous space programme in the first place.