It's not just the Indian government, parminder, it's the Indian public that considers broadband to be a luxury item. That's because most people here don't look at the internet as the amazing tool it is for information, consumer awareness, shopping etc. etc. but consider the internet to be basically Hotmail and MSN messenger, i.e. a chatting device.
This sad state of affairs is reflected in a lot of Indian websites, for example, universities & colleges don't even keep their websites updated... They don't have an idea of how much time, money and effort they would save by posting things like admission information online..... then there are
business that don't provide basic information on their websites.. but one can't blame them if they (correctly) think that the internet user base is not large enough to yield profits.
On the flip side, with "broadband" costing what it does, I don't blame the public for thinking it is a luxury item....
Basically I think ISPs need to directly invest in e-business, which will jumpstart the cycle of :
More Internet subscribers
=> More money spent online/More institutions maintaining websites
=> ISPs earning more (e.g. if Airtel invests in e-business)
=> Reduced cost of internet access
=> More internet subscribers
and so on & on & on.......