IIT is considered a very exclusive brand of people aroudn the world and its evident that the world recognizes these institutions a deadly combination of the likes of MIT, Princeton and Havard!
IIT is also famous for its "tough" competitive entrance exam and increasing the intake would force the administration to change the degree of difficulty in order to keep up with the intake of students that they wish to have. Already the no. being increased to 7 has shown its effects on the entrance exam standard and increasing it to 12 will be have an even more degrading effect.
I think instead of only increasing the number of IIT's the govt. should instead upgrade the facilities on offer to the present IITs. IIT will be a major hub for world class research if presented with the right funds which needs to be channelized. Unlike the universities in the US, IIT's are grossly underfunded and the lack of this clearly has a telling effect in the kind of research that goes on in the 2 countries.
Its not the number of IIT that will improve the technological prowess of the country but the kind of work thats being done at them. If 7 cannot do the job for you then neither can 12!