On the contrary, I see this as a clever way to cool down the escalation from the Modi administration.
Here's my reasoning:
It is pretty well known that the Indian military does not always listen to its government, and the recklessness of the Indian grunts on the front line is responsible for a lot of the friction between the Chinese and the Indians.
The fact that the Modi government's entire legitimacy comes from "superpower 2020" and Hindu Nationalism means that it is politically incorrect for the Indian government to punish soldiers that keep testing these waters and push the boundaries figuratively and literally. After all, it only takes 1 leaked video or photo to rile up Indian national support for whatever the hell these soldiers are doing. I'd even suggest sometimes Indian soldiers can get promotions for stirring stuff up and initiating conflicts with the PLA, which is why they keep doing it.
Now this type of behavior is all fun and games before, since the Chinese never made a huge response to it. So the Indian government just pretend they don't see anything. They can even blame the incidents on the grunts on the ground, saying that it is not their intention to initiate such conflicts. Well, in 2017 and this time, the Chinese are no longer buying this stuff and they give a very blunt response, here comes the dilemma of the Modi administration.
On the one hand, India cannot start a war with the Chinese. We all know the huge difference between the capabilities of the PLA and the Indian armed forces, so I will not elaborate on this. Additionally, the Chinese has this tradition to start wars that end all future wars. The Korean war, 1962 war with India, 1969 Zhenbaodao incident with the Soviets and 1979 war with the Vietnamese are all fantastic examples of this. The Chinese do not go to war lightly, which is why they typically back down in conflicts and resolve them using peaceful manners most of the time. But when they do decide they need to fight, they will make sure their adversary will never have the capability and the audacity to fight with the Chinese ever again, at least in a 30-50 year period. Chinese wars are not about the fighting, but about the long term geo-political dynamics that can be shaped in the years to come. Indians do not know where the red line is, but when they do cross it, the Chinese will not simply start another 1962 war again, the outcome will be much worse this time, perhaps the nation-state of India will break up to fragments if Indians do cross that line. Thus, Modi is wise to de-escalate in the current situation, and the Chinese has helped Modi tremendously by not releasing any hawkish statements or release photos/videos of the incident.
On the other hand, India's heightened nationalism stirred up by Modi, is not letting this incident die down. It is pretty ironic that most Indians believe "whatever the Indian causality is, the PLA must have twice that", yet they believe they did not have the upper hand, and are humiliated in this incident. Indians demand a response from Modi to the Chinese, or Modi's government risk losing the legitimacy in the eyes of angry Indian mobs to any attempts to de-escalation.
Under this situation, Modi has relaxed the restriction on the military by allowing them to "fight back when necessary". I think is a move that hits two birds with one stone.
By granting the military the autonomy to escalate a incident, the government is no longer micro-manage the soldiers on the front line, Modi has essentially moved all responsibility and blame for future escalations from his government to the military. The military now faces the pressure of the consequences of their acts. I think the message to the military is this "if you shoot a PLA, then don't count on the government's diplomatic response as your first line of defense, you gotta deal with the PLA by yourself until we are ready to negotiate and use diplomacy". This means that the military can no longer play dumb and shift blames to the government for the stupid things they pull on the front line, and need to seriously consider the repercussions of their actions. This may, in fact, keep the Indians on the front lines in check, and contribute to de-escalation, since the Indian military is no match for the PLA. When the military's interest is on the line and they have no one the fall back onto, they will probably play things a bit smarter and look at the bigger picture.
Now, to calm and ease the Indian public, this announcement may also proven satisfactory. With this announcement made, your average Indians will probably happily accept that fact that the PLA has lost a lot more people than the Indian side, and Modi's statement is re-assurance that any future move from China will be faced with serious response. This will given Indians plenty of face, and save their embarrassment, and somewhat cool down the war-mongering sentiment as Indians orgasm to the sensational report of their news media. If Modi's any smart, he should already be funding a Bolllywood movie based on this incident, showing 8 feet tall light-skinned Indian dudes beat up newborn Asian babies in snowy mountains to keep up the "superpower 2020" dream and make to your average Indian audience happy and proud of their national identity.
But of course, this is only my speculation. If the Indian military is not as wise as I'd suggested, then.... well.... I don't know what to say then...
