Hosting in India is far more expensive than US. Most of the Indian portals (including ours http://www.oneindia.in ) is hosted in the US. We are a multi-lingual site - English plus 5 Indian languages.

So far I don't think anything bad has happened to us because we are hosting a .in domain outside the US. Search engines should merely pay attention to the content plus response time. Not where it is hosted. By hosting in US if surfers from India are just not able to surf our site, then agreed we should be penalized.

BG Mahesh