Microsoft office suite for $10 per month: Will this 'pay as you use' model work in India?

It can work in India if prices are made attractive. The bundle should include OS+Office tools as it is standard with all other OSs like Ubuntu etc. The choices of FREE bundles from Ubuntu and other OS+Office bundles will make Office only offer from Microsoft not attractive. It can succeed if it is bundled with the notebook PC (hardware warranty + OS + Office bundle for 3 years)

Pay as you go is not the model suitable for India at all, especially in the consumer segment B2C.  We don't need any research report on this. Just observe the telecom industry.  Majority of the subscriber base is prepaid.  

That simply means they decide how much to spend first and then buy, that too when their budget permits.  Many of them plan to use services without recharging using one time payment for a life time validity, recharging just to sustain enough to give a missed call or an SMS.  

They are not ready for a regular monthly commitment.  Again there is a stigma associated with equated monthly payment due to the major negative impact of Bank EMI's, RCom's mobile billing and the terrible experience people have had in the past and all the news surrounding it.  So any such recurring expenses are generally given a second thought.  It will take a while for the market to get matured into disciplined regular payments.  It is also a matter of stable job market that adds up to the fear of people getting into such long term commitments. 

Primarily what microsoft needs to do is, owing to the tremendous size of the market, it has to lower the price of the product.  Majority of Indian market is price conscious, lessons to be learnt from telecom solutions providers.

A price tag around 2000 to 3000 is what I have found as the comfort zone of most of the computer users as they spend within this price band on any accessory of the computer.