How do they figure out who is living outside India (I'm sure they do it right, just would love to know) ? We specify Indian address and passport verification is done in India.

US scrutinizes all in-bound travelers who can board only with "OK to Board" check. Global Entry just replaces the verification of entry eligibility. Foreigners on B1/B2 visa can now use Kiosks anyways(at most airport/terminals - as long as they have used the visa/passport once as can repeat ESTA visitors) and they can bypass the blue form and being screened by CBP officer.

At the Global Entry interview they do look for past CBP offense. I had a colleague denied Global Entry(he is a LPR) as one occasion he had an apple that he got in flight for his 3 yr old son. He didn't realize and it was in his diaper bag - the agriculture violation record was put on his name as he filled the custom form for the family. At that time he was not informed and not fined either(the fruit was confiscated).