My general experience from people what from India from call centers is that they learn to repeat phrases but don't understand them. This is no different than getting a parrot and having a parrot repeat sounds. I've noticed Indian call centers the people working tend to be very good at memorizing.
No, modern education in India has not made people literate but not educated, because learning how to read is the very first step. A person cannot learn something advanced if they do not first learn something that is basic. Teaching people how to read is the first step in learning how to do more advanced things.
The educational system within India, considering the vast amount of people and general low standard of living, has been successful in providing education and literacy, not just the latter itself. India as a nation has the largest amounts of colleges and universities in the entire world, a testament to their educational hierarchy. In addition, there has been an increase in the number of Indian nationals who have become doctors, lawyers, and other high-status jobs throughout the world.