I'm confused with django project root and the virtualenv. Please guide
No. The libraries are not part of your code and shouldn't live in your project directory. They're dependencies, and should be installed by pip when you deploy just as in your development environment.
I'm new to django and have a virtualenv outside my django project directory. 
When I download open source django apps like python_social_auth using pip install, the apps reside in the virtualenv's site-packages directory and not in the project root. But I import them in my projects. Should I keep a copy of the downloaded apps in my projects root? Would that be necessary if I wanted to deploy the project?