Create a website this week called Google India. Make the UI look about the same as Google.com, but with a little different color scheme. Then send an email to Google's founders asking if it's okay. That's similar to what you're doing with HN India. :)

The situation is not exactly the same, because you did start with a code snapshot that PG made available to the public. However, it's generally considered bad form -- as well as confusing to visitors and search engines -- if you use a name that is extremely close to the original site's name.

Things would be different if you created something in a totally different medium, or if, as others have pointed out here, you first got explicit permission from PG and YC to do this. The site name "Hacker News", though it is composed of two generic English words, does now form a unique reference to a specific site that carries a certain cultural cachet and set of expectations. To "ride" that, without permission, is not a good idea, even if you can get away with it.

One good thing that may come of this, however, is the notion that perhaps there's enough demand to make PG consider adding a "sub-Reddit" like feature to the HN codebase. So folks like you who basically just want to not reinvent the feature set, and also want to address an approximate subset of the core HN readership -- where in this case the subset is Indians or India-ophiles, etc. -- could do so freely with explicit support and functionality that enables it.