Also a lot of the good software engineers in India end up relocating elsewhere, like the US, to get better pay. I've worked with a lot of really talented Indian software engineers, and some really terrible Indian developers (I hesitate to call them engineers).

All of the talented ones had relocated and were living in the US. I'm sure there are some talented software engineers that stay in India also, I just never end up working with them (probably because the companies I worked for were trying to save a few bucks by outsourcing to begin with, and went with the lowest bidder).