Could you provide some URL to point to how this idea of groups came upon for India. I only saw the staff leading the way for this instead of this coming about organically.
This happened on IRC over a few hours, between me, quim and harsh. Most of the conversation was quim convincing me that a mediawiki-india list would be a much better Idea than a MediaWiki India User Group (which he succeeded in), and Harsh volunteering to start the Ahmedabad one. The logging bot has been wonky, so no logs.
As for 'why User Groups, why not a SIG' - the User Group idea is neither unique nor novel - it is a very well understood concept. Linux User Groups, Python User Groups, Ruby User Groups, Java User Groups, etc abound on per-city levels. This is just another user group for a piece of open source software. MediaWiki does not run just Wikipedia, but is also (IIRC) the most popular software used for standalone wikis. Plenty of projects that use MediaWiki have nothing to do with the Wikimedia movement (An experiment with using Semantic MediaWiki for Public Transit routing a bunch of us tried a few years ago, the w3c wiki (w3.org/wiki), lots of internal company's documentation wikis, lots of open source software wikis, etc).
And 'why formalize their affiliation'? IIRC you need to go through the process to obtain the right to use 'MediaWiki' in your group's title. That is all (from my perspective, at least).