Some comments from an Indian working in Bangalore: there is definitely a lot of weed in the services offered from India. If you expect everybody that you come across in cheaper countries to be 100% efficient and as intelligent as everybody else in the world then rest of the world is really cooked. That's hardly the case. I have been on both sides of the interviews and have seen really crappy resources. On the other hand I have recruited bright guys for as little as $1000/month. The key here is to spend some time in choosing your resources. This could be a difficult task especially for foreigners because they have no or little idea about the country/people they are outsourcing to. Some ideas for getting the right resource: 1) Use any Indian connections you may have. I am sure a lot of them will have connections back home. This is your best option. 2) Use your LinkedIn connections. 3) Hang out in newsgroups/mailing lists and watch out for people who answer questions. They are generally good. 4) Use communities like news.yc and slashdot. Some communities attract bright people and some of them could be Indians.

I know it's not as easy as I say but you need to take that extra mile if you want good resources. It will pay off in the longer run.