That's not the point of building the $35 tablet. It's not trying to be better.
In India, as of 2005, the official poverty rate was at 42% (
source). Poverty here is defined as "living below $1.25 a day." If you make less than $1.25/day, an iPad will never be an option. A government subsidized tablet that provides the people with communication tools is more realistic. It wouldn't matter if the iPad did everything in your house (cleaned, cooked, etc.), it will never be viable for a huge percentage of the population.
The issue here isn't whether or not it's better (as I said), it's determining the best way to provide the people with these tools. Yes, the $35 tablet will not have the same functionality but as I said earlier, the much much cheaper price will drive people to it especially in a country with such a high poverty rate. It is therefore pointless trying to argue whether or not it is better because it's not trying to be.