The decision to transition to 556 was born out of our experience in Lanka and that the rest of the western world was going 556IMHO there was no need to replace the SLRs in the 90s with Insas. Back then Pakis were our primary adversary. They were using G-3s back then and still using that now as their standard infantry firearm.
Modernized SLRs and reverse engineered AKs (for CI role) should have been the choice in the 90s. If that would have happened, we wouldn't see the small arms mess that we find ourself in now. Instead, we went for Insas and imported AKs.