Assuming 20% of 20 billion dollars is paid to Dassault in 2014 it still takes a big chunk out of the IAF's budget for 2014. Which acquisitions do you think the IAF will defer to pay for Rafales?
The most logical way would be, that IAF pays for the first 18 Rafales that will be produced by Dassault itself and which are already budgeted by the French forces. Lets assume a high system cost of $150 million each =>$2.7 billions, so roughly half of the budget, but obviously less than what you estimated.
That still leaves more than enough room for Apaches (although I would kick them first for Rudras or LCH, if I had to safe money somewhere), Chinooks and most likely the A330 MRTT.
So neither do I see IAF defering procurements, nor should there be any need to divert funds from IA or IN as you assumed earlier too.
Nothing new, we have discussed that last year when the news about TATA increasing S92 production rate till the end of the year.
IRST and Displays constitute Industrial benefits from Rafale?
Isn't it? How would you describe Samtel getting hands on techs (especially the HMS, the optronics and IRST) they couldn't develop anytime soon, that they can not only produce for the Indian rrequirement like in every normal licence production, but also for any future Rafale orders, especially the export once. That gives them the possibility to earn additional money, apart from the work they do for Indian forces (exactly what you want HAL to do as well) and lets not forget that this industrial benefits will also create more jobs in India! It's not only Samtel, Reliance will surely built wings for export customers too, BEL, or even HAL. The French even revised their offer in Switzerland after we selected Rafale, because they planed with diverting production parts to India to reduce the cost.
We have comparable industrial benefits from producing parts or taking over maintenance for Migs or Flankers of other Asian countries, we produce parts for Do 228 aircrafts, but all at far lower level then what the MMRCA / Rafale gets us. Imo, the industrial benefit with the EF could be even higher as part of the consortium, but it's the whole package that counts, not just one part of it and the overall benefits made Rafale clearly preferable for India.