On the one hand, this is a clear sign that the market for colleges appears to be working properly. There is clearly a big gap still between the older institutes - at Kharagpur, Delhi, Mumbai, Chennai, Kanpur, and now Benares and Roorkee - and the newer ones. Many students who were good enough to get through the JEE would prefer, if they failed to receive a slot of their choice, to try to get into non-IIT engineering colleges such as Birla Institute of Technology and Science at Pilani in Rajasthan, or even some of the national institutes of technology. However, it is a matter of some concern that five years after the new IITs were set up, the gap between the two sets remains so wide. Not that it is completely surprising; it has been difficult for them to hire faculty while their campuses remain incomplete, and prospective employees cannot be offered the housing options that the other IITs do. Given that, why did the government choose to call them IITs at all? Note, at the time, the IIT Council, the institutes' overall governing body, had warned against a hasty and wholesale expansion.
That said, it could persuasively be argued that preserving the IIT's brand name should not be the government's primary consideration: that should be to expand the number of engineering seats on offer. The market, and public perceptions of quality, will take care of matters thereafter. It is worth noting that engineering students have become wary of the quality of the institution they are entering: Maharashtra, which has seen a vast expansion in the number of engineering seats on offer - thanks to overly generous terms for new colleges, many of which have dubious links to local strongmen - has seen as many as 50,000 seats lie vacant this year because of students' concerns over quality. In any case, the number of faculty at the older IITs may not be a suitable benchmark. According to some studies, the student-faculty ratio, when masters' and bachelors' students are both counted, at the older IITs is around eight; approximately 1.2 undergraduates and 1.2 masters' students graduate every year for each member of the engineering faculty. The comparative numbers for the top state engineering schools in the United States are 3.5 for undergraduates and 1.4 for masters' students. But the point remains: students are not blindly flocking towards the IITs any more. They have more options, and the institutes themselves are now more variable in quality.