It's true, it would hurt indigenous development and growth. However, the alternative is betting on the fruition of such a domestic effort that's several years into the future at best. In the mean time India is on the back foot, regionally speaking. While already heavily out matched by the PLAAF, if Pakistan were to continue the modernization of their air force and actually end up procuring J-35AE (EA?), then any tactical air engagement would become very grim prospect. Sure India and Pakistan will likely never enter a true war, but each skirmish on the air would end in favor of the PAF. And the Rafale and Su-30, regardless of how good the are aren't a match for a true stealth fighter, something that various exercises over the years emphasized.
That leaves them with the KF-21 and the Sukhois as possible option to close that capability gap until AMCA is ready. The LTS would be the best fit, but isn't ready yet. The KF-21 is almost ready, but not a true stealth fighter either at the time of its arrival. However India could be offered to participate and fund further development to finally achieve that capability. However participation or at least localized production is also something UAC could offer with the T-75 or even Su-57E. Which brings us back to the Su-57E which is the only option that's currently available and allegedly, possibly, maybe already adopted by another user aside from the VKS.
What speaks for it is that India is already very familiar with Russian systems and operates in the Russian ordnance ecosystem due to their Su-30s and MiG-29s. As for production, according to what has been published by UAC with regards to annual production and deliveries, the current unit count of Su-57S serials is around 30, maybe a few less or a few more. The initial contract is for 76 aircraft, something that's not far off. Additional funds through sales could also enable them to expand the production facility further, something they planned already anyway IIRC. So it brings various benefits with it, although the LTS would arguably be the better choice, just not existent yet. While KF-21 is the other. All of them hurt domestic efforts equally.
Time will tell