The Indian public deserves an equal or greater share of the blame. Government is the people's responsibility in a democracy. If governance sucks, the citizens are not doing their job.
Your average person in a developing and poor country is not Arun2009. It's a fairly ignorant person who doesn't know either his rights or his duties.
I think literacy & education is one of the biggest bubbles. I had to spend a lot of time thinking about it, and talking to people with experience in the subject before the vast idea of what it means to be illiterate started to dawn on me.
For example, teaching a class on how to use computers to people at the library. They all want to know how to 'look for a job' online. Show 'em how to use the mouse, what icons represent the internet, how to get email, and see they're having trouble. Slowly begin to understand they're only memorizing shapes and patterns of letters, and don't really know how to read or write.
We're all so hyper literate, I can say that about everyone here. We're practically a different species than people who don't know how to wirelessly communicate through space and time. It's impossible to hold poor people in india who basically only have spoken word communication, and oral tradition historical context, to our standards.
[1]http://en.wikipedia.org/wiki/Poverty_in_India [2] http://en.wikipedia.org/wiki/Literacy_in_India (the numbers here are severely underrepresented - there is consensus among most NGOs that more than 50% illiteracy prevails)