It is as simple as that - the local laws unfair it seem need to be abided by everyone including the diplomats. If the maid can't be compensated as per the local laws(and A3 visa clause as well), let the IFS officials not hire a maid and not break the laws. Afterall many Americans and even Indians who earn multiple times more than Devyani can't afford a maid. Why do many feel that diplomats are entitled to a maid?
That is how Indian society is, whether you like it or not. Almost every middle class employs a maid to do meniall jobs in their house. To turn your argument over, even people who earn far less than DK employ a maid. Govt officers, especially from the three prestigious central govt services, are given maids and chauffers and gardeners, even though they (the officers) get paid much less than people of similar qualifications in the private sector. To go by the same example of the IAS officer I mentioned above, even when he was a district collector, he had as many as ten personal staff in his house. (That has been trimmed down these days). The reason for the seeming extravagance is that menial labour is very cheap in India, and middle class Indians are used to having maids and gardeners. But they are not used to many other luxuries that the middle class in american society takes for granted. That is a difference of culture.
Now you may have an opinion that things should change and people shouldn't employ maids, because you don't see americans doing that. But that is a value judgement you are making about a cultural aspect of each society. On the whole, the standard of living of the Indian middle class is far lower than that of the americans, although we employ servants and they don't. What one culture sees as a luxury, the other culture sees as necessity. The american middle class has several cars at home, while the Indians have at most one. The amrican middle class flies in airplanes for most of their travel, while the Indians travel by train or bus. Americans cannot employ maids and servants, but Indians can, because labour is cheaper in India.
And the diplomatic corps of each country lives by the standards of their own country. That in why Indian diplomats earn far less than what a similarly placed american one does, but still gets servants and maids. They live according to how they live back home. That is the tradition for all diplomats - they are not NRIs or people who went abroad to earn a better living, but a govt servant sent there on a governmental mission. They will be provided the same lifestyle that govt servants in their position back home earn.
About local laws - there is a reason why diplomats and consuls are exempt from most local laws. In even the strictest muslim countries, foreign embassies can and do stock and serve liquor, although that violates local laws. There is a hilarious episode in 'Yes, Prime Minister', where the british PM sneaked out liquor from his embassy to an official funcction elsewhere, an incident that was rumoured to have happened in pakistan. The point here is that diplomatic staff on diplomatic passports are expected to live just like they liive back home.
They should be apprehended if they break a law that causes hardship to the local people, or anybody else. For instance, going on a murder spree. Although breaking labour laws is a crime, the reasoning for that crime doesn't apply to this case, because the maid lives a much better life than any american minimum wage earner does. That is why this law should not apply to Indians sent as maids to counsels and paid for by India.
Heck, DK herself earns only a fraction of what an american doing the same job earns. Why should the maid be any different? In fact she is - she lives a better life than an american maaid who doesn't get her clothes and food and housing and medical expenses get compensated.
So whether India pays the diplomats as much as american ones earn, or whether India pays them much less, but gives them priviledges like maids and chauffers, is for India to decide, based on Indian cultural norms. You cannot make a value judgement on that.