I can only infer some hints which try to answer my question !!!
But there is no clear answer ... yet.
Firstly, to clear things.... no body needs to be apologetic about reverse engineering. Is there a single instance where reverse engineering of a foreign product actually hurt Soviet Union ... or for that mattter China ? The answser is NO.
Obviously, there is NO disadvantage of doing reverse engineering (... on such stupid grounds as "illegality", "immorality" and other such bull).
The real question is .... what stops other nations from doing reverse engineering. That was real crux of my questioning. And I got only a few hints .... but no clear answer.
Possible Answer 1:
Someone above gave a hint that reverse engineering is NOT EASY. Presumably, you need to have a great manufacturing base to be able to do it (.. and only China has it, as of now).
Russia, US, Europe or Japan also have that kind of a manufacturing base .... but as of now, they don't need to do any reverse engineering.
In other words, India needs to further build up it's manufacturing base.... before it can successfully reverse engineer, say for example, the Su-30MKI.
Same constraint could be deterrent for Brazil or South Korea too (e.g. they have failed to develop space rockets, thus far).
Possibly it needs even further level of development to be able to reverse engineer aircraft engines.
So, Capability to Reverse Engineer is a real issue.
Possible Answer 2:
Reverse Engineering is not Cheap.
China possibly intends to induct 500 reverse engineered Su-27.
Thus, saving on license feel payable to russia = 500 x License Fee per Su-27 (for every license manufactured aircraft).
If this total license fee is much more than cost of Reverse Engineering, only then it makes economic sense to do it.
India has a requirement of only 250 Su-30MKI. It may be economically better to pay the license fee on 250 aircraft, rather than spend much more money on reverse engineering Su-30MKI.
Reverse Engineering fails on economic grounds, if original copies come cheaper.
Possible reason 3:
Reverse Engineering can help in self-sufficiency.
Even if it's costlier than buying original copies .... it will remove dependence on, say Russia.
However, true technological independence comes .... only if subsequent planes can be developed from scratch. Otherwise, in future also you would need a blueprint, sample of a later technology to be able to reverse engineer.
Reverse Engineering can only help "catch-up", not leadership. That suggests that even China will like to stop this reverse engineering business and focus on basic R&D.
Reverse Engineering can help make copies of, e.g. Su-27, but does not give calibration charts on technical parameters ... which would be vital to next phase of developments.
Summing Up:
1. Capability to Reverse Engineer is a real issue. Everybody doesn't have that capability, as of now.
2. Reverse Engineering can be economically viable if you have a large volume demand for reverse engineered copies (better so, if you can export it as well).
3. Reverse Engineering can have some gain for understanding contemporary technology.
Some combination of the above factors could also be the reason why India does not intend to reverse engineer A-320.
Anyway, these are only what can be inferred from above comments. There could be further issues involved (like reliability of a reverse engineered A-320).
Quality of Reverse Engineering is Much More Important for Civilian applications, than for military applications.
Stating of the obvious... everyone in this forum know of what you have stated down. The only thing that you have pointed out on the Su-27 reverse engineering is that IT IS NOT REVERSE ENGINEERED! The PLA had the blueprint and technical assistance from the Russian, it is called LICENSE BUILD! So common sense has it, this is not a reverse engineered product.
The first few batches of J-11 are all using Russian kits with domestical contents coming in in later batches (all in the contract). The main reason for the Chinese to do that was because of the following,
1) Lack of experience in designing and building modern fighters
2) Lack of very advance manufacturing bases.
3) Lack of knowledge in this term
4) Speed of getting their airforce up to standard.
And after they receive all these technical knowhow and stuff like that, they began to radically improve on the J-11, using advance domestical radar, soon using own domestically designed and produced engines, own missiles and weapons and also using more composite material to reduce weigh of the fighter.
And to a nation - who cares about what others called when reverse engineering, especially when it came to weapons. But if you are going to clone something civilians that are being patented, you will get sue for it, and that is what patentship are for (to prevent direct copies of the product).
And how to this thing works? Very easy, someone (say, BAe or Airbus) patented hundreds of thousands of design and manufacturing process on A320. China wanted to reverse engineered it, and could reverse engineered it. Then came out with exactly the same design as the A320. What next? Sell it to international market? Airbus will bring the chinese company to court, force them to pay royalty or pull out their products from the market.
The European consortium is very powerful in this, they might even stop or ban airline operating the cloned A320 from entering their airports or airspace for that matter. So the only airlines who dare to purchase this product are the domestic airlines in China... which btw was making huge losses each year.
So what is cheaper for China to do? Buy A320 as per normal and forgoes all these crap about royalties and stuff like that, at least their international airlines could fly freely.
And what is more? C919 or this stuffs are coming out too. So why do you want to risk getting sued or things like that for cloning something that you could actually produced domestically?
Second, China's manufacturing bases and strenght plus technical know how was already not like... say... 50 years ago. They could stand on their own, without need of cloning aircrafts and ships... plus if really wanted to, they could... look at some of their rocket launchers, their Humvee lookalike and the such.
Plus... cloning of enemy's weapons would never hurt CHina or Soviet Union or whatever countries or nations in history. People are doing it for centuries. What will hurt China was that she was thrown into a needless arm race that would deplete all of her treasury and money... and the country will split into small little fractions.