Anything that is available in abundance (and hence easily) loses its value. More the number of IITs less will be the competition, which will dilute the quality intake of IITs.
Further, why should Govt. concentrate on Engineering alone so much? Boost fundamental research, which will fuel our growth in the next century.
If we consider Indian IT Industry, I think its a partial success. We have not created any major technology in India. The technology leaders are from the West. We still pride ourselves as good users of that technology and Service Providers.