They know that Indian developers are mediocre but management believes that mediocre is "good enough" at half the price , and guess what , it might hurt your ego , but in many cases mediocre developers + long working hours can solve most problems that typical devs encounter. You just need a good dev overseeing the efforts if the project is complex.
If you do that you'll find that outsourcing to India is actually not such a bad idea and guess what , we're cheap :D.
Overall it has been my experience that you pay multiple offshore resources to get the output of 1 onshore resource. If you bring them from offshore to onshore their productivity does go up some. The caveat to that is they do have really good QA teams and I wouldn't hesitate to leverage them in that role.
The only way I can see is to thinly slice the system enough and to require business peer review and daily demos on all slices to correct bad systems earlier. This also means you need a top engineer devoted to babysitting on behalf of the organization, and a good enough engineer to handle the code reviews can probably do the job better than a team of remote mediocre engineers.