I think it's just peaks and troughs.
They lack fight and character IMHO because of their captain. He is NEVER a wicket keeper/batsman, certainly not Test standard(keeping). He is good with the willow at home, average over here but when it comes to donning the gloves he is a poor excuse for a keeper.
Ghambir can only play on sub-continent pitches and he's been found out over here.
This has led to instability in their top order.
Their bowling has been ok-ish but they don't have somone who would strike a bit of fear or mop up a tail end in short order. They inexplicably left out Pankaj for the last Test, his figures didn't show just how unlucky he had been and how much endeavour he'd put into his spells in the previous one. He also displayed a keen attitude, especially when it wasn't going for him.
With the likes of Sachin, VVS, Dravid etc having retired they're at a loss and have struggled to find a batsman or two who can play in any continent/hemisphere.
They are in a similar position to Australia a couple of years ago, when Lee, McGrath, Hayden, Warne and Gilchrist all left within 18-24 months, leaving a huge chasm in selection.
For a Duncan Fletcher side too they certainly seem to be lacking a bit of grit, which is surprising, given what a touch, uncompromising character he is.
There is also the 20/20, ODI and IPL mentality i.e. some have got to learn to change their mindset completely when playing the different formats of each game and have to tailor their game accordingly. Too many look to keep the scoreboard ticking when playing a Test when what they really need to do is drop anchor for 30-40 minutes, but that's a symptom of all cricketers of late, not just the Indians. KP, Prior and on the odd rare occasion Bell have gone for the big hoik when the match situation required a shoulder of arms.
That's my two pennorth worth anyway!