1. Chaired positions: First thing Indian institutions should do is to offer prestigious chaired positions to these distinguished Indian professors who are planning to return. An attempt should be made to create true chaired positions (not the current systems where chair positions are usually given to senior members of the faculty in the department) with very distinct salary structures and research/organizational perks.
2. Research support: The returned people should also be offered good starting grants to setup their research labs and programmes in India. It is also important to provide adequate support staff (in the form of secretaries, grant-writing people) to these individuals so that they can develop research grant applications for various Indian agencies and compete for funds.
3. Less teaching initially: It is also important that for the first few years, the teaching loads on these returning professors are low so that they have time to establish their research programmes.
4. Market-driven salaries: The salaries in these cases should be comparable to the salaries offered by the Indian private sectors for their middle-management personnel (as is the case in the US for technical and management areas). For the established Indian professors in US and other developed countries, it is important for their spouses to get convinced about their decision to return to India. So the prestige and good salary will help in this cause--do not expect them to return in hordes for the measly salaries and facilities currently given to Indian professors. Additional perks such as good living quarters, schools and other amenities in the campuses will also not hurt.