I don't think this is a fair thing to say. In my experience the quality of software engineering varies wildly in all countries. There's always the cream (smaller numbers, relatively) and always the mass of software engineering wanabies in every country.
The thing with India is there's just a lot more of all types in absolute numbers. The perception problem India has is that the weaker engineers tend to try outsourcing and the strong engineers are snapped up rapidly by big companies who recognize their talent.
If you look at the Google I/O keynote video this year, there are a lot of Indian engineers in high positions presenting. This is where the top dogs are. They're not going to be the ones completing your outsourcing requirements.
The other flip side of this is the companies doing the outsourcing are often as clueless as they percept the engineers to be. They often haven't a clue how to properly document their requirements, they inflict constant scope creep and then give 2 hours notice of the contract ending.
For the record I'm a software engineer in the US, and yes, every experience of outsourcing to India has been bad. I don't think I'm blameless for that.
