It's not like they could have taken this money and made any significant impact on the problem. Plus space programs have indirect long term benefits that are hard to calculate.
More scientists and high tech industries is a good thing for a country.
Ok let's say I'm poor. I have a job that pays very little. I could choose to work more hours to get more money OR I could choose to take night classes and get a degree in something.
In the second case, I'm giving up temporary income for more long term income. Just because I'm giving up income does not mean I'm making the wrong decision.
This is a similar thing in India. They are not wasting very much money on these space projects. But if it could kick start a space industry, it'll more than pay for itself in the long term. Space is only going to get increasingly important and if India is left behind they will lose more money (and therefore more hungry people) in the long term.
It's not black and white like you are trying to make it.
There are corrupt politicians and businessmen who steal money from the poor and spend it on stupid shit that is definitely higher than ISRO's budget and yet ISRO's budget is the only thing that we need to shit about.