"We are very focused on India as a strategic market," said Shailesh Rao, Google India's managing director. "The vibrant video community will only grow."

Yet for all the hype, few Indians have fast broadband internet, which is critical for using high-bandwidth services such as videos, graphic-heavy computer games and internet telephony such as Skype.

With just 4m broadband connections, India is woefully behind government targets of 10m by 2010. "We are seriously lagging behind on broadband front," India's telecoms regulator said in a report early this year.

A recent OECD report showed that China adds 3.32m broadband connections in a quarter, whereas India adds just 80,000. The penetration numbers are all the more surprising given that India is known for its technology hubs and grabs headlines as the world's fastest-growing mobile phone market, with nearly 270m subscribers. India signed up 10m mobile customers in March alone.

"It is hard to rationalise the extremely low penetration of broadband," says Mr Rao. "It definitely makes you scratch your head."

Many factors are responsible. India's dearth of personal computers; lack of relevant computer services for the masses; poor infrastructure; a multitude of local Indian languages; and problems establishing last-mile internet connections are some of the reasons broadband has stalled in India.

David Appasamy, spokesman for Indian internet service provider Sify, puts it more bluntly. "India is supposed to be the IT superpower of the world, but we have an abysmally low penetration of PCs at home. It's got to turn around."

The biggest hurdle is low PC penetration of just 3 per cent, or 6m, says Mr Appasamy. Relatively high prices for computers was thought to drag down sales. But although Indian manufacturers have recently come up with a $200 computer, sales have not grown substantially.

The challenge is to make computers more relevant to average Indians. "The utility of a phone is very clear," says Kunal Bajaj, director of BDA India, the telecom consultancy. "But people don't need computers."

Most urban Indians use computers for e-mail, instant messaging and searching job websites. But these services are less relevant for rural dwellers, who account for nearly 70 per cent of India's 1.1bn population.

India claims 49m internet users, 40m of whom are in cities, according to internet research firm Juxtconsult.

Gaining relevance is also complicated by the fact that India has more than a dozen official languages, each with its own script, which demand special keyboards.

To address the linguistic challenge, popular Indian web portals Rediff and Sify have local language websites. Yahoo, India's most popular website, has local language instant messaging while Google offers search in five languages.

But even if computers become more relevant, there is a larger issue of connecting the crucial "last mile" to customers' homes. Government policy does not allow internet service providers to share the cost of delivering the final leg of connectivity from a communications provider to a customer with telephone companies.

Yet for all these hurdles, internet companies are keen to grab an early foothold in India, especially as new technology helps spur convergence of mobile phones and the internet. "If Google and YouTube don't establish themselves now, they won't be in position to compete in the future," says Mr Bajaj.