The options army had were
1) AMX-40 from France
2) T-72 M (M1) from USSR
3) Chieftain 800/900 from UK
4) Upgraded Vijayanta
Each and everyone from the list would be far better.
AMX-40 was still a prototype. But had better armour, engine, protection and possibly fire power too . It had L44 gun , and had 460 mm RHAe protection in the front , comparing to just 335 mm of T-72M and 400 mm of T-72M1.
Chieftain 800/900 had Cobham armour and almost equivalent to Challenger 1. Definately better firepower and far better protection. Being a western design , and using Cobham , it could help Arjun project much better.
Either of them, now, with some needed modifications in electronic and FCS, and little add on armour / ERA would be much better than combat improved T-72 M and M1 which were intentional downgraded version
DRDO claimed with Kanchan Armour they can compensate only draw back of Vijayanta. Later some were upgraded too. With 105 mm rifled gun , better new FCS, engine etc and also having option of adding new main gun , far better crew comfort it would be a really good option.And it would be the cheapest of all.
So, All of three options ,according to me, would be much better than procuring downgraded T-72s.
Infact when it was procured many asked why T-80s weren't procured (that would be worse though). T-72s were manufactured in India in late 80s. And as soon as 1991 Gulf War showed horrific catastrophic performances of Iraqi T-72s , Indian Army wanted to overhaul all of the T-72s from Yugoslavia (Note: T-72 didn't come to India before mid 80s and in less than 10 years of it, we wanted to overhaul , however it was never overhauled )
I guess T-72 , Mig-23 etc were procured only for the sake of diplomacy.
Otherwise , in both cases we had far better alternatives.