About 1) Yes, broadband is less prevalent in India. But, storage costs are low. It is easy to get it from a friend who has the movie.
In how many cities do you find a legal DVD renting service for INR 50 ?
2) You are spot on about the 2nd point. It is a marketing failure on the part of movie studios that DVDs are still such a niche market. Multiplexes and cafes are booming, so why not DVDs. Availability may again be a factor. Before Flipkart, buying a DVD was a chore, esp. if you don't live close to a shopping mall.