Standard of living is going up, but quality of life is definitely declining in major cities. There is a lot more money (even after adjusting for inflation) so the purchasing power has increased tremendously. There is a much richer variety of goods and services people have access to, housing is a lot nicer, people can afford vacations and so on. All that is on the positive side. On the negative side, people spend longer and longer time commuting in worse and worse traffic, suffer more water & electricity shortages. The general stress level of urban life has gone way up. Overcrowding would explain all of the negatives, and I have outlined why the overcrowding occurs. It is not just "too many people", because even the most densely populated regions of India have plenty of space when you leave major cities and India's population density is at the same general level as Western Europe. It is the inadequate infrastructure that causes massive overcrowding.

I agree with your overall point though - I am an optimist.