OK, maybe some students do outsource their projects. This does not mean that hard working students who can prove themselves otherwise are ignored. To companies like Infosys, CTS etc. who actually indulge in mass recruiting and have pathetic interview standards, of course, this might make a difference. But to good companies how want to recruit good Engineers, projects on the resume can only aid in interview calls. A lack of knowledge would be apparent in an interview. While you explain the problem, you never make an attempt at finding or listing a solution for the same. But instead, you end your post with a rhetorical statement.
Analyzing this problem, I think it can be attributed to widespread plagiarism in engineering schools in India. In the US, plagiarism is dealt with severely and can even lead to expulsion. This forces Indian students who used to indulge in malpractices in their undergrad to put on their thinking hats for once and be creative, for the fear of expulsion(which would be a disaster after so much preparation). Thats when one realizes the consequences of ones action. Such a system should be enforced in colleges in India.