The government of India doesn't have any clear understanding about Bitcoin. They still consider it as a mode to carry on illegal activities. That is why they will never allow SEBI to come up with something similar to Bitcoin ETF. I don't think Bitcoin will be ever traded in the Indian stock market.
I don't think that the government of India doesn't understand how the crypto industry operates. There is nothing complicated about the crypto space that can not be comprehended if one is willing to put in some effort to learn. Learning materials are everywhere and they can easily learn from other countries. Okay let's assume they don't know, but they can easily employ the services of experts in the industry to assist them in making and implementing relevant policies.
The only problem is that the government doesn't have an interest in the sector. The perception that the reason for not making crypto-friendly policies is that it is used for illegal activities is outdated and archaic. The US and other developed countries once had this mindset but they have moved past that era and are now making friendly policies. Government policies are highly dynamic so I cannot write off the possibility of India approving a Bitcoin ETF in the future.