It's the public version of the Ivy League ticket
Here in the US, we have an equivalent setup with the Ivy League universities. Thousands and thousands of students (and their parents) go to extreme lengths to get into these schools for one simple reason -- getting into and graduating from one is almost a guaranteed ticket to success. Either you will make connections with kids of some of the richest people in the country, and/or you will be recruited for incredibly lucrative positions in law, medicine, investment banking or management consulting. In particular, all the banks and white shoe consulting firms recruit exclusively from the Ivy League for the best positions. Wealthier parents will pay private school tuition fees from preschool on with the implicit promise that their kid will be qualified to get into the Ivy League later.
We also have a public higher education system (which I went through.) If you go to a good state university with good programs, and have a little bit of motivation, you'll do OK. The experience is a little different - I'd liken it to dealing with a state agency in many respects, but that teaches you something too. My private school graduate colleagues have told me that once you're in an elite institution, they basically make it very difficult to fail after that; you get tons of support. At the big state U. I went to, no one really cared if you passed or failed as they were dealing in volume.
The indian example of the IITs is a preview for what could happen in the near future as good jobs become more scarce. In India's case, the income inequality there means that getting into an IIT is like winning the lottery in terms of success; the alternative is a life of grinding poverty.
Biting the hand that feeds IT
