I diagree with your claim.

If you have a situation where the number of engineers is doubling every few years, it is no surprise that the average quality would decline; it will start going up when the total output of engineers stabilizes again.

On the other hand, note that the state of Tamil Nadu used to produce only 2,000 engineers a year; if you look at the top 2,000 engineers graduating out of Tamil Nadu today, I'm sure you'll find that they kick ass compared to the past. I don't have data; but I think the onus is on you to produce evidence for your claim that the quality is declining every year :-)