If India has an interest to host the Olympics, they should definitely bid to host them. I think all places deserve a fair shot and its unfair to exclude certain places from being able to host the Olympics. It should be fair game for everyone and I think hosting the Olympics in India would be interesting.
No, India should not bid to host the Olympics, because they are still emerging as a world wide superpower. India should spend its extra money on social issues, and on food security. Sports are nice, but they are essentially a luxury. India should still be putting its resources to other things, like the welfare of its people.