I read some of the comments here that attribute the problem to the lack of resources or the communal good. I respectfully disagree. The main problem in India is the outdated system.
Most Indian kids have plenty of resources available to them and most parents in India would go hungry as compared to not provide the needed educational resources that were needed by the kids. Also, most Indian kids are super competitive and they have to be when their parents are always asking their rank in class.
Having said that, I don't think it really matters over the long term.
Here is my personal experience:
Growing up in India, cheating was not only accepted but encouraged. I did my high school in India and during the big board exams, I was one of very few students who didn't cheat - out of 200. Why? My dad (and some of the other parents) told us that if we cheated, they will kill us. During the exams, the teachers that were proctoring the exam came up to us repeatedly and asked if we needed help and trust me, it was tempting because you don't want to fall behind someone who is cheating.
There were and are a few factors at play. One is the emphasis on year-end exams. They are the only means of determining the students' performance. No papers to write, no projects, nothing else. Teachers are rated only on the success of their students in these year-end exams. Competition is very high. Parents (admittedly not all) are willing to do anything to help their kids get ahead. If you go to a school during exam time, very often you will see parents standing outside trying to pass notes through windows etc. I have heard of people who hid phones under their turbans in the exams and all kind of other crazy stories.
Now, here is why I don't think it matters. In the short term cheaters scored better but in the longer run, the few of us that didn't cheat came out ahead (small community so I know most of the people and where they are now). In hindsight, I am very glad that my dad didn't allow me to cheat. After that experience, I went to undergrad and grad school in the US and I did see cheating - Indians, Chinese, Americans - everyone cheated, some more blatantly than the others.
It didn't bother me because I strongly believed that in the longer terms those that didn't (and don't) cheat will come out ahead. So far, I haven't seen anything that has disproved that hypothesis.