While it's true that most of the aircraft (usually helicopters) shot down in Iraq have been flying low, MANPADS can hit targets much further - Stingers, for example, have a ceiling of 3km and a range of 5km. Besides, a helicopter lost at low altitude is still a loss, and it is probaly easier to get a 2-3 man MANPAD unit close enough to that helicopter than getting an elderly Mig through in the teeth of a much superior airforce.
As for cost, the calculation must also include the infrastructure needed to operate the aircraft as well as the cost of the aircraft themselves: runways, fuel, maintenance, parts, pilot and ground crew training, air-to-air missiles and so on. For SAMs (perhaps excluding complex ballistic-missile area defence systems like Patriot), the cost of the missile system is essentially limited to the launcher, missiles and radar, mounted on more-or-less conventional trucks for mobility, and crew training and maintenance are much simpler.
As has been said, for a 3rd rate military up against a modern, 1st-rate airforce (US, NATO, Israel etc.), a good SAM system will be significantly more cost-effective than an elderly airforce. It will also likely be overwhelmed eventually, but it will take longer and cause far more damage than aircraft for the same investment.
This
http://www.house.gov/israel/issues/shoulderfiredmissles.htm is the page of a US congressman who wants to protect civilian aircraft from missiles gives various statistics.
To quote from
Combat USAF Manned Aircraft Combat Losses 1990-2002:
"In operations between 1990 and 2000, however, the USAF lost 17 airplanes in combat, including 14 over Iraq and three over the former Yugoslavia. Thirteen USAF airplanes fell to Soviet-designed surface-to-air missiles (SAMs): seven to heat-seekers (infrared) and six to missiles guided by radar. Antiaircraft artillery (AAA) downed three airplanes. ... Allied air superiority assured that no USAF airplanes were lost to enemy aircraft, either in aerial combat or because of enemy raids on friendly airfields."
Conclusions: If a country with an elderly airforce is attacked suddenly by a modern force, their best strategy is to fight guerrilla tactics and avoid direct combat. However, if
planning the possible defence of a small country without the resources to develop a modern airforce, a SAM defence will be siginificantly more (cost-)effective than any airforce that country is likely to assemble.
India in this context is a somewhat anomalous animal, while they may not have the most modern planes, they have the resources to upgrade them, field a comparatively large number, and train their pilots to an excellent standard. Moreover, the size of the country makes an airforce more sensible, as they can fly in from distant airfields, while a SAM defence would have to be huge to cover the whole country.