I have seen such a huge debate & complicated analysis about this No.1 Test team that India holds here in PP. I don't think anywhere else this is even discussed! For heaven sake it is just a goddamn arbitrary ranking system (Just like Tennis individual ranking or FIFA team ranking which doesn't guarantee you any particular grand slam or trophy! You have to qualify for that & win it by competing with teams/players!) I don't know who in PP will lose what property if India is awarded No.1 rank.
You scream and tell India doesn't deserve No.1 rank for all the reasons (overseas defeats, not able to dominate like WI/Australia, etc), but at the same time nobody are saying which else team deserves it on what basis? They will bring the WI/Australian past teams! Shall we bring all those retired players now to compete with current Indian team? If you are so severe about this, why don't you complain ICC and file a petition to close this fake ranking system? Even if you award 4 points for overseas wins and award just 1 point for home wins (as someone suggested), still you may see India on top finally (maybe with some lesser points!) Also someone recently said that India play more matches (both home & away), and hence they get more wins (Can't he just understand that if you increase the matches, then you are going to also lose more matches overseas?) The number of matches is dependent on economic benefits (with the understanding between both the boards involved) and it has nothing to do with win/loss! (Why a third party should bother this?) Do you want to kill Test Cricket just for the hatred towards Indian team? How foolish is this! If we needed more wins then we would have organized more matches with WI/Sri/Ban/Afghan and not in England where we lose so much! As simple as that!
There are some reasons for the kind of domination past WI & Australian team had! India, Srilanka were not formidable sides then! South Africa came into picture in 90s. Cricket was not too commercial! Also ODI/T20 were not so fierce then, which meant the gap in quality between teams was bigger (teams did not understand the strengths & weaknesses of each other much) hence stronger teams tended to dominate the lesser teams! Also teams (especially Asian) did not knew much that they can develop a home advantage (pitches, bowling style, etc) to attack visiting teams!
Mark my words in future you will never see such dominance (WI/Australia style) anytime by any team, because of all the commercialization, competition, social media, TV analysis, resources, facilities, etc. All you will see is fierce competition wherein some teams can be marginally better than the other, that's it! That's why you are seeing such variations in team ranking within span of months (see in ODI, T20, etc. Teams struggle to hold to a position for some time!)
Hence whether you like it or not ICC will continue this point system & ranking. Please don't take it so seriously and keep calling India as No.1 (I don't think India is termed as No.1 so much in any other place apart from PP just to criticize them, but in the event you are unnecessarily glorifying the so-called No.1 rank!) In the same terms we can say that no team apart from Australia deserved world cup from 1992 onward (lets also include 1983) because they were really not "DOMINANT" as you say, mostly they were lucky & things just fell in their place!
If you continue this, there is danger that country-based competition will die and people will be more interested in club-cricket to become friends! (Some countries like WI are not at all interested in serious cricket anymore!)