In the new Global Delivery Index (GDI) 2007 from IDC Bangalore is the Number One in the list.
"while Chinese cities are on the rise and closely nipping at India's heels" : I don't think so. The world heard only few Indian cities(like Bangalore, Delhi, Mumbai etc) where the IT is happening and that is not the case. The tier II cities like Cochin, Ahmedabad, Pune, Mysore, Chandigarh ... (very few names listed here) are much much cheaper than the cities listed in the GDI. IT industry already booming in these tier II cities in India. The strengh of India is the young, hard working, English speaking and well educated population. The interesting fact is no countries can instanly manufacture manpower.