Simply heart wrenching account of our love for phoren maal !
Your argument is correct for strategic defense systems (Like fighters, AWACS, EW Radars etc. for which we need to depend on OEM countries for maintenance and upgrades. For the sake of "Strategic Autonomy" , indigenous solutions are needed and we are doing it well in the field of ballistic missile programs, Radars, etc.
For a $1000 a pop rifle, you need a couple of experienced gun smiths , CNC-Lathe machining tools, good material sourcing, good QA , and QC practices, that's it. It's neither a rocket science nor nuclear engineering. CARACAL has done the same with no prior experience in arms manufacturing. Heck, even the madarssa chaps are making decent copies of AK/AR at FATA region of Pakistan.
But here, despite of all bad press given to INSAS for decades, it seems OFB has hardened its stand to not deviate a inch from its beloved INSAS design for even its upgraded iterations. It must be a shame for OFB to see RR/CRPF Cobras adopting AKs in place of INSAS for CT ops. They didn't wake-up from slumber to just provide latest production batch with foldable/telescopic butt stock and full-auto version. They kept churning out orange painted junk. Therefore, I am judging it purely from its track record and the new products they are pitching for INSAS replacement which sadly seems devoid of innovation.
INSAS replacement program is not going to eat up the budget of IA as the cost of acquisition is not so high. Equipping your infantry to teeth with best rifles and protective gears must be the first priority before the MOD before signing any fancy contract for MBT & Missile procurement. We should stop treating the life of jawans like dispensable cannon fodder.
For private player part, I agree they must be given chance, in fact, a production line in collaboration with SIGs could develop ecosystem for quality small arms production in India, which can be replicated for carbine/LMG replacement programs.