This is simply not a battle they can, or should win. If Indians don't like the way their government treats their privacy, they need to change things themselves.
I agree with you here. The governments concerns do sound legitimate, as far as terrorist groups go, but I'm not sure if it's to the point that they need to strip every blackberry owner of their rights. Personally, I'm all for privacy, and you're right, if the Indians want to have their privacy respected, they need to make a stand and be willing to take the risks associated with it.
"When people are least sure, they are often most dogmatic." -- John Kenneth Galbraith