Indians tend to believe that they are morally much better than others. Let's look at some areas of morality:-
Sex: Westerners and Africans tend to be open about their sexual promiscuity. Indians, on the other hand, are far more conservative, and this may make it look like Indians have superior moral values. But scratch beneath the surface, and the picture changes. Indians do exactly the same things that others do, only behind the scenes. We have one of the fastest growth rates of AIDS, thousands of girls forced into prostitution every year, and widespread sex before or outside marriage. The divorce rate in India is much lower than that in the West, but the difference is small in affluent circles. This shows that India's lower divorce rate is a consequence of our poor economic condition rather than strong sexual morality or the willingness to adjust with someone else.
Finances: India is among the most corrupt nations on the planet. If you are a visitor to an Indian city, you can be sure of being cheated by cab drivers and shop keepers. In 2011, the Comptroller Auditor General of India estimated that politicians and their cronies rob about 84% of tax money. It is impossible to get any work done with any government office without paying a bribe. Indian money to the tune of trillions of rupees has been siphoned off to Swiss bank accounts. In megacities like Mumbai, officials are so corrupt that there isn't even one decent road.
Law Enforcement: Most crime in India is unreported. Most of it that is reported goes unpunished because the police are unwilling or unable to catch the guilty. Our judiciary is clogged with millions of pending cases.
Oppression: It would be unthinkable for members of a religious or ethnic minority in an American village to be driven out and illegally forbidden from returning to the village. However, this often happens in India. Hindus rightly condemn Western racism, but often fail to realize that the Indian caste system and occasional persecution of Christians are no less brutal. And while Westerners have largely abandoned racism, caste based oppression in India continues unabated. Bonded labour and child labour are two other Indian phenomena that are absent in western countries. Imagine an organized racket in New Zealand that chops off the limbs of children and makes them beg on the streets. Most of the money these kids obtain is confiscated and the kids are brutalized if they don't make enough money. Further, imagine that the police and politicians turn a blind eye to it. Unthinkable in Christian-influenced New Zealand?! Commonplace in Hindu India! I don't mean to be offensive here - I'm just telling it like it is.
Social initiatives: Hindu sacrificial philanthropy is minimal. Most philanthropy in India consists of tax funded schemes, projects by comfortable NGOs, and Christian hospitals and schools.
Discipline among youth: Although Indian youth don't have the money or opportunity to buy guns and shoot their school mates, all the symptoms of moral decay among youth - bullying, substance abuse, teen sex, etc. are widespread.
Freedoms and rights: In India, freedom and human rights are not considered inalienable but a favor bestowed on individuals by "the state". Freedoms are severely qualified. For instance, you have the freedom to speak only so long as the hooligans approve. If they create a ruckus, you will be accused of "disturbing communal harmony" and denied the right to speak.
Thus, the morality argument backfires on Hinduism. A close examination shows that Hindu India is morally bankrupt, and this reflects poorly on Hinduism. [The only saving grace is that Hinduism makes its adherents tolerant of those who disagree, compared to Islam. Thus, the status of religious minorities in India is much better than that in Islamic or atheist countries]