> The key, of course, is that many American students self-select out of applying to Harvard, and indeed don't self-select to submit an application to any "prestige" university.
Self-selecting out is true for IITs also. Let's not forget that IITs are focused purely on engineering stream and a bit on technology management courses. IVY Leagues on the other hand are broader universities covering other streams such as liberal arts, life sciences, law etc.
If you compare the size of student-body which grows up each year (the ones qualifying 10+2 intermediate school) in India, and the fact that only a fraction of it applies and appears for the IIT entrance, you will get a clear comparison on which university has the lowest acceptance rate going by this metric too.
However, let's not blind ourselves with ratios and percentages alone because absolute numbers have a bearing on competitiveness too.
I remember there was a study a few years ago suggesting that countries like India and China are so populous that the number of honor kids they produce is higher than the number of kids we have in west [1]. Also check out this video which shows how IVY leagues form a backup option for most IITians with Vinod Khosla, Narayan Murthy et al.
http://www.youtube.com/watch?v=BK3rX1sg5kg
Not saying that universities like Harvard do not have a high enough benchmark or a lesser quality admission process, but if we were to compare quality of entrance exam/criteria of only the engineering streams of Ivy Leagues/others universities with what the IITs have, then the latter would be right on top.
[Disclosure: I am an IITian, so apologies for the conflict of interest w.r.t to my statements above.]
[1] http://blogs.wsj.com/speakeasy/2012/06/26/are-your-kids-smar...