I can relate to what you are saying but let's be a little more charitable to the author. He mentioned the city having "ambitions" to be a "world center for innovation", and not exactly that it already is a one.

The key message of the article though is correct. A lot of immigrants (working in the IT domain) are coming back, surely not because they see Bangalore as a hub for innovation, but rather it gives them a good opportunity to settle back in their motherland without compromising too much on the other things in life. Not every tech worker is doing high-end research in US, and those who aren't in to it, can very well get a similar job back here.

I am not exactly sure about quality of work done in 'labs' of the big software companies, but as you said things are coming up well in the hardware companies. (I worked in Intel Bangalore for a couple of years)

Overall. at least at this stage, if one is coming back in hope of finding the same entrepreneurial spirit as in the Silicon Valley or be a part of super skilled staff in a research lab trying to cut out a next generation chip-set, the person might be in for some disappointment. (But heck, if you can settle in for lesser financial incentives, there always is ISRO/DRDO for the cutting edge technical work.)