First of all, like almost every answer mentions here, what's the big deal if a film wins an Oscar or not. Not just an Indian film, any film. Similarly, what's the big deal if a film wins or doesn't win a Filmfare award?
Not to mention, all but one film (per category) out of the hundreds made in USA don't win the Oscar.
But, that doesn't answer the question here.
Technically, a film (including a non-American film) can be nominated in one of the categories if it satisfies the eligibility rules . So, the question here could cover all categories and not just the "foreign film" category.
For the technical categories (including direction and acting), I can't think of a better reason than why one film wins and the other doesn't. The winning film is considered better by the jury than others in that category. We could drill down in each category and ask why aren't Indian films better than the winning film, but I am not equipped to debate on technical aspects of film-making. And isn't a whole LOT of this subjective anyway?
Let me take a shot at the Best Picture category. Assuming that awards are a measure of a film's quality, in this specific case the Oscar Awards, two reasons, instinctively come to mind -
1. I have no numbers here, but just a general assessment. The ratio of time and importance given to the writer's job in comparison to the rest of the aspects of the film must be really high for Oscar winners (or even nominees) than Indian films (on an average). I do think, a lot of how a film turns out depends on how its written and arguably, Oscar winners are written much better than an average Indian film.
2. But, we aren't talking averages here right, we are talking about the best. I don't think the best Indian films fit the eligibility criteria referred to above. And here I say best as per the taste of the Academy which is, who are very likely to be mostly American. Note that over the life of the award, only films have been nominated in this category. (A more interesting point in the discussion on the "foreign film" category below.)
That leaves the "Best Foreign Film category":
Each country submits an entry to this category. The nominees are chosen by a committee of members (of the academy) drawn from all branches (editing, cinematography, etc). The winner is decided based on voting by Academy members who have seen the films.
I would agree with the argument made in a couple of the answers here that the quality of even the best Indian film has tough competition from the world around.
Also, the submits to the academy for consideration to be nominated in the said category. This is basically a committee, so it enters the zone of personal tastes. Dangerous territory. Add to the equation - politics. Need I say more.
