it, in my opinion, actually distorts the picture. this is because many rail lines in India in the most populated region carry far more than their sanctioned capacity. routes leading out of mumbai towards north, ALD-MGS section, ET-AGC etc carry more trains than the number they were designed for, and hence while 1 Km track per thousand people may correspond to 'x' number of trains (x<1) in other place it may correspond to 1.6x or even 2x if the network is heavily loaded.
unless some correction factor compensating for overload is involved, the picture depicted by the rail density per 1000 Km is going to be rather wrong, ending up showing far rosy picture in areas with rail lines but facing neglect...
more... from IR w.r.t new trains, and painting a negative picture of regions blessed with trains.