I wanted to start ISP business in small town in India and there aren't any known sources whom I can directly contact and they will give me details about plans etc. Before I can convience my friends to join me and search for such contacts, I need to do some calculations.

One of my friend told me that we can get 10Mbps connection and divide it in customers using Amplifier(never heard of it) and by using it we can provide 50 customers or even more with 1Mbps speed at the same time and they will all get that much speed. Any such thing is possible?

Any information on how does it work will be great.

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First, you need to get permission from your ISP to do this, if law doesn't explicitly allow you to do so. You can route all the local people to your router assuming you have legal rights to do so. They will get whatever bandwidth is available based upon current usage. This isn't hard to do. Consider it a VWLAN (Very Wide Local Area Network). The biggest issue will be the distance from your router / modem to the most remote user. There are signal boosters you can use to increase the distance of either wired or wireless devices.

FWIW, I have never heard of Amplifier. I'll have to do some research and let you know what I find.

Ya we will have to obtain license first.

I had access to control panel of one of my local ISP. He had around 150 customers, most of them used around 1 mbps speed and few used maximum speed which was upto 4 mbps. When I saw speed of his router, it never crossed 5 mbps. As if his all cusomers were able to use same speed at the same time. Practically seems impossible to me, any thoughts?

Use Mikrotik Router (Winbox) to divide and control speed which you gave to your customers. Find appropriate model for you and enjoy it.
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