I'm more surprised that the gun couldn't go full auto.
Well, there is this British legacy of semi-auto weapons.,No, let me rephrase...actually the answer is more complex.
The Indian army still has a legacy as set up by the British as a mercenary force. The object was to have expert marksman ( or as good as possible) to fight lightly armed insurgents. The PLA, Red Army and the US army all grew out of revolutions with mass mobilization of the common people. It was difficult to train that many marksmen so from muzzle loading muskets to rifles the concept was of volley fire. India adopted volley fire under the British when they were still in the muzzle loading era ( Brown Bess muskets and Enfield IP 53 Rifles ) Remarkably when they moved to single shot breech loading ( Martini Henry) and early Lee Metfords they still retained the volley fire principle, when most countries were abandoning it in favor of "fire at will" principle.
Matters didn't change much during World War 1 by which time the Indian Army had started using magazine bolt action rifles ( Lee Enfield Mark 1). By World War 2 the Indian Army converted to the "fire at will" principle but by that time automatic rifles like the Tokarev, Garand M1, and the SturmGewehr were already in use in battles where self loading automatic fire was increasingly the norm. Also the use of sub-machine guns such as the Sten, PPSh, MP38 were in widespread use. The British gave a very limited number of sub-machine guns to the Indian Army and squad combination was three of four Bren gun supported by a platoon equipped with bolt action rifles. The Sino-Indian conflict in 1962 was fought with this infantry composition. In the late 60s early 70s India adopted the FN FAL 7.62 X 51 self loading rifle in the semi-auto configuration when much of the rest of the world had converted to selective fire assault rifles ( M16s, AKMs, G3 ).
In theory the FN FAL could go auto
but it was entirely uncontrollable in that mode.
To fill the gap India made do with hand me down AKMs either captured or purchased from smaller countries ( Romania etc.) with marginal quality, These were very basic weapons with bent metal "stirrup" type frame stocks and iron sights. Still an AKM is better than a FAL for urban COIN work which is what were the priority operations for the IA till recently.,India has only now started acquiring original Russian manufactured AKMs and AK103s.
The INSAS was developed to replace the AKM because it is supposed to be a "system" rifle that can be fitted with night vision, scopes, grenade launchers and with a bi-pod and lsrger 50 round magazine function as an emergency machine gun.
The problem with system rifles is that even though multiple roles can be configured its performance in each role is marginal. The rest of the world has had a different approach for quite sometime. A standard battle rifle with integrated 4x sighting is adopted with a full auto or 3 round burst capability. Specialist roles such as sniping and grenade launching is done by specially trained infantrymen and special weapons. Indian is now converting to this doctrine.