These things are more a factor of aggregate risk handling. As an example, if you have tuberculosis it is possible even in the US for the country to mandate that a doctor watch you take the treatment. Totalitarian? Authoritarian? A tool that could be used to force someone to have to show up to where a state-controlled authority could confirm that they are? Yes, all of these things could be words you could assign to that.

But societal combined risk is commonly handled in this way. In the US, if you employ someone you have to report that you paid them to a central federal government. Way to track someone? Surveillance state? All words you could use.

And the government previously restricted gambling and so on. The question isn't "why would a bad government do these things?". The question is "would a benevolent government do these things?" and "if so, why?". And the answer is quite straightforward, I think:

Someone in the government has observed that there is a great deal of cyber crime in India. A fairly uneducated population, with very high smart-phone penetration (85%+ apparently), and a large number of fraudulent actors that their federal government is unable to enforce against. So they're attempting to attack the problem where they can.

This is ultimately India. They don't need insidious "app on your phone" / stingray / any other sophisticated solution. The local politicians can manipulate local authorities to get your cell tower association data and SMS. And if they want your comms devices they will rubber-hose the secrets out of you.

Someone I know worked at a big FAANG. He's Indian so went back to Bangalore to see his ailing mother. One day he took an auto-rickshaw while wearing his FAANG sweatshirt. The driver took him to a makeshift jail where he, police officers, and a magistrate conspired to threaten the guy with prison unless he paid $10k. $10k is nothing to a FAANG engineer, so he paid up, was brought in front of court on some lesser charges and then had to pay a small fine (much less than $10k). And then he flew back to the West Coast and never returned to India. Trying to reason about this kind of place using the perspective of the West is meaningless.

I think it unlikely they're trying to use this as cyber-surveillance. India simply does not have the infrastructure necessary to do that at scale. And they have the infrastructure for the rubber-hose, and Indians wear their identification on their sleeve, so to speak. Names point to ethnic groups and castes. Primarily endogamous marriage means if you want to perform violence against groups you can simply spread out from one member of the family unit being visibly of that group.

Using an app to get access to someone's data there is sort of like using Heartbleed to get root on a machine on which you are in /etc/sudoers with NOPASSWD.