Elance seems to say that the issue has been fixed
http://elance.zendesk.com/forums/30972/entries/108402
Update: We are happy to report that the issue with PayPal transactions to and from India has been resolved. PayPal has made the needed changes to allow payments to flow through properly going forward. In addition, the funds from any reversed transactions have been credited back to your Elance balance. You are now able to withdraw these funds using your PayPal account or another withdraw method of choice.
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