India also has special need to have fab for its defence and space program. This may be prime reason for government involvement. Apart from this, it may be very difficult for fab to be successful in India.
Why would India even want a Fab? It is a huge capital investment and if you manage to get enough volume of customers to justify the investment, it is time to re-invest in the next technology node. It is also getting harder and harder at lower geometries to scale in volume - take a look at the 32nm problems at GlobalFoundries.
The Indians have perfected the S/W outsourcing model and are making money hand over fist. It is a low investment, quick ROI business, why mess with success?
That is true! India has a huge pent up demand in almost everything. Same was the case with telecom when people had to wait for 10 years to get a telephone connection- Came Sam ( Not Uncle Sam!) and just in a matter of couple of years all the scenario changed.
There is money with the government. Infrastructure can be created and the huge project such as setting up of a fab can well be executed on schedule = we just need another SAM!!
IF we have a mission man like Sam Pitroda ( who was responsible for the telecom revolution in India and who enjoyed 100% support from the then Indian prime minister) behind this project then this project will definitely succeed.
Call me a cynic... I don't believe a fab will ever come up. What will happen is somebody at consortium will get paid off, Indian politicians will have a new revenue scheme, a few poor souls would have a cushy job for sometime and that will go away.. and in the end there will be a new empty fab city, with whole lot of folks owning useless land around it (these will be the suckers who bought the land).