I think you've made a misdiagnosis here. MKI upgrades assuming GoI wanted it to be indigenous as opposed to what IAF may have desired was always a function of maturity of the various sub systems indigenously. That took time & here we are when these sub systems are ready.
Mk-2 funding has gotten caught up in extraneous issues like the ability to mfg the TF in India along with the requisite ToTs for it which seems to have been caught up in politics namely our silence on Russia in the Ukraine war & off late the Panun / Khalistani incidents. Will they be mutually resolved & things go back to normal ? Time will answer it . Unfortunately the IAF is running out of time.
MRFA is an even bigger mandatory requirement given the looming war with China where even otherwise the Mk-2 & the AMCA weren't expected to figure in the line up of the IAF given that these FAs are expected to make an appearance in a productionised form only in the 2030s whereas our conflict with China will be prosecuted before the decade is out .
If the conflicts between the State Dpt & MEA aren't sorted out amicably , all future co operation with the US in the field of collaborative defence ventures will be jeopardized. With China being the elephant in the room , I doubt both nations can afford such a stalemate. Let's hope we reach a mutual accomodation with the Americans ASAP.
Where the GoI should be faulted is in not reaching an accomodation with the IAF as far as MRFA goes earlier with the latest date being June 2020 when after Galwan any remaining doubts in the minds of our foreign policy mandarins regarding China should've been cleared . That doesn't seem to have manifested itself in ordering the second tranche of 36 nos Rafales if not 54 nos & swiftly expediting the RFP for the 114 nos MRFA tender.
The GoI also bears its share of blame for not expediting the JV for the clean sheet 120 KN TF for the AMCA Mk-2 . I recall Raksha Mantri asking MoD to seal up the deal within a year back in the first half of 2021. It's been 2.5 years since.
