Prof. Dheeraj Sanghi of IIT Kanpur makes an excellent proposal for allowing students lateral admission into IITs.
There is a precedent for this kind of lateral admission in India. For many years now, Engineering colleges affiliated to Anna University in Tamil Nadu have been admitting students completing their diploma from Polytechnics directly into the second year of B.E / B.Tech courses. Many other universities in India have also been doing the same. Here is an extract from the Anna University Regulations.
2.2 Lateral entry admission
(i) The candidates who possess the Diploma in Engineering / Technology awarded by the State Board of Technical Education, Tamilnadu or its equivalent are eligible to apply for admission to the third semester of B.E. / B.Tech. in the branch corresponding to the branch of study.
(ii) The candidates who possess the Degree in Science (B.Sc.,) (10+2+3 stream) with Mathematics as a subject at the B.Sc. Level are eligible to apply for admission to the third semester of B.E. / B.Tech. Such candidates shall undergo two additional Engineering subject(s) in the third and fourth semester or fourth and six semesters respectively as prescribed by the respective Faculty.
This can be expanded across the ecosystem to include the IITs as well, allowing students from other Engineering colleges to transfer into IITs at the end of the first or second year based on a set of criteria to be decided.
Prof. Sanghi has made out a very strong case for lateral entry into IITs, looking at how this works in the context of the three tier university system in California starting with the Community Colleges, the State Universities and the University of California system and considering the pros and cons of implementing it in the IITs.