Mint has this nice article on how Apple got its India strategy wrong for the iPhone launch:
Lost Opportunity | How Apple got its strategy wrong
To add to this, Apple charges its customers in India full charges for the handset, which means no subsidisation from the service provide and yet the handset it locked to the service provider.
In US, handset is locked to AT&T but then subside the cost of the handset and charges only US$200. The rest they make up over the 2 year contract.
In India too, Apple should either sell the handsets unlocked at full price, or if the service provider wants to lock the handset, they should subsidise the cost.