Animator (and TAG Prez) Kevin Koch has expounded to me on this subject, but the Wall Street Journal lays out India's animation problem in a focused nutshell:
At an industry event some time ago I watched as the representative of a prestigious national body stated that Indian animation would grow out of its mom-and-pop roots to a billion-dollar industry. Even then, I took the statement with a large pinch of salt. Indian animation has been threatening to become a billion-dollar industry for the best part of a decade. Yet, other than a few marquee players, there isn't much to show for those expectations ...
The start was good. A plethora of studios came into existence ... The billion-dollar mark did not seem so farfetched. However, within a decade the hyper-competitive and highly incestuous Indian animation industry began to implode on the back of poached deals, dubious management and lack of a quality artists' base ...
The failures of Indian animation are simple to understand, the key ones being our inability to create quality content, lack of an indigenous market, the sub-standard training of new artists and dubious studio management ...
The difference between an artist in LA and his counterpart in Mumbai is staggering. A foreign artist will bring a sense of art history, pop culture and humor to the table, his Indian counterpart will bring only his ability to follow instructions and work harder than anyone else.
The conundrum for Indian animation is the same as it is for any overseas cartoon house that specializes in low-cost subcontracting work. That kind of production, by its nature, is produced quick and dirty. The focus is "fast, for a fixed cost."
That being the case, the overseas studio has no incentive to A) improve the quality of staff, or B) improve the quality of production.
Why? The work has already been bid on and secured; now it's just a question of getting the job out the door for the lowest possible cost, the better to raise profit margins. So the big driver is how to get work done for even less money, not how to make the work better.
This is the savage spiral in which sub-contracting animation studios find themselves: the overarching goal is "cheap," not "good." It explains why creatively ambitious artists often leave sub-contracting studios for greener, more satisfying pastures, and why independent animated features produced by overseas job shops are generally lacklustre. The cartoon houses haven't build production infrastructures that know how to do anything other than fast, mediocre work.
That being the case, how much should the artists of DreamWorks, Pixar or Disney worry? Maybe not a hell of a lot.