If they can deliver X amount of value they can also charge X for their service. This means if you hire an Indian for $10 an hour you're going to get value equivalent to $10.
Since productivity per member drops as you increase team size you can't just hire a bigger team to get yourself out of this problem. The true number of developers that your project needs is probably constant and quite low.
If you hire cheaper but less experienced developers then it might simply take 6 times longer to finish the project than if you had hired an Indian developer that charges $60 per hour. This is usually where the project fails. Managers expect the project to be done in 6 months but this estimate is based on competent developers with 3 years of experience, not beginners who are working on their first project and first need to gather 3 years of experience to adequately finish the project.
Really the only way you can get a real bargain is by hiring someone, letting them gain experience without giving them a raise. The difference between market rate and actual developer salary is where you save the most money. The tricky part is creating a environment in which people want to stay.
I think the most promising signs for the local industry is that it’s starting to produce some rather successful home grown startups. Which are much more likely to attract local talent than the outsourcing body shops are.
Big IT Indian firms usually will choose one or two highly talented developers for a project team and others just hop around them. Usually these projects aren't also very engineering-intensive and becomes boring once the base framework is created for creative folks. Good devs don't stay longer in a company at least during initial years simply they're in good demand and gets double the package with every jump. Eventually they'll make it to Indian subsidiaries of US companies like Microsoft/Google or, they'll start their own expert consultancy/product companies.
For the record I've worked out of India exclusively and have charged up to about $100 hourly rate from my US clients. I've gone through above process - my last job being at Microsoft India (2011-2016)