Well, I dont see why India shouldnt keep playing 3rd division teams for a little bit, bring up their confidence, and then start playing against some better teams (maybe 2nd division, then 1st, etc), instead of directly playing some good country and looking pathetic that they dont want to play the game at all (playing against weak nations is no gud either cos that wont help the overall idea of making India a gud football-playing nation).
So I think there is nothing wrong with India's going. We must remember India is ranked very poorly among the nations that do play football (130 or so out of 200) and football is not a highly worshipped or even followed sport. So give them a chance and i am sure in a few years India will be good in football.