1. Submarines are being developed in sufficient numbers. Underwater UUVs were tested as well.. but as such mini subs can help in sabotage operations but not against a deployed at sea fleet or aerial attack.
2. The cost and complexity of the design makes it not feasible.
3. Maybe more might be useful.
4. That would be a good start.
The idea I have (and i am just a lay person not an engineer or a professional in the defense field) is that a small say 500 ton submarine, with a simple litium electric propulsion, with a small UUV piggybacking it. The submarine would have enough range to target major ports on the Western side of India. Armed with 4 torpedoes (simple, non-reloadable except at port), and a few mines, it would be able to stalk the ports.
The UUV would detach and be vectored towards the port. It would be armed with two torpedoes and target anything in the harbour that moves, or simply wait just outside the port for a ship to enter or leave.
The mini submarine, while not ideal for what you pointed out - striking at an indian fleet (we can leave that to the big subs), would be a step up from A2/AD just like the latest Azmat class boats.
Both these could be locally built. Instead of having complex and full performance systems, one could build this mini submarine locally. Sonar, torpedoes and propulsion from abroad, but the intellectual property would belong to PN, and there would be possibilities for sale. I think it could be a hit product as a decent coastal mini submarine is overpriced and overengineered right now.
Most navies don't need a full sized submarine which cost billions to acquire and operate.
A small boat, an enlarged Azmat class would not only be a lot harder to hit with a supersonic cruise missile (estimates I saw say that there is only a 50% chance of a hit, even without any defences, just because of size, speed and maneuvering), but also the loss of a capital ship would be catastrophic compared to the loss of a large FAC.
Advances in electronics mean a small boat today can basically have similar capabilities to a frigate 30 years ago. The main problem is over the horizon radar. That is something you can't put on a small boat and doesn't make financial sense. Sonars have become incredibly small and compact. So have missiles and even radars.
Now, there may be a work around for the over the horizon radar problem. To have reasonable air defense, you should have a medium range SAM, which means targeting at 20km away, which would need detection at 50-70 km range. A radar on a small boat would barely be able to to 30-40 km in real world conditions due to curvature of the earth. This has been a perennial problem of small boats.
Now that an AESA radar (say C or L band) has allowed us to make such a radar light and small, all one needs is to think out of the box. One such solution is to integrate a small airship - rigid aerostat that is a hybrid of an aeroplane, an aerostat and a kite. Shaped like an aeroplane so has lifting surfaces, powered by an electric engine, and tethered to a Azmat MKII. AESA and propulsion runs on power from the ship (tethered means connected with a cable). As it is a heavier than air platform, it will be relatively stable. When not in use, the "Aero-ship-kite" would be winded down and tucked into a rear platform of the ship. This rear platform does not need to take up a lot of the precious deck space. One could extend the rear deck with a steel extension, and use a telescope hangar. Being an airship like device, it can be deflated to make it smaller. since it has little weight, an extended platform in the rear would not be challenged.
The ship would be able to deploy such a flying contraption and perhaps a UAV (perhaps the whole concept of a combat ship can be rethought, perhaps in the A position, a main gun does not need to lie, instead one could have a rail launching system for a UAV). Mid ship you would have an 16x medium SAM, and in the rear 4x2 Anti-ship Harba (I think this is an extended range C-602). 2x CIWS/RAM hybrid (I've seen a CIWS with a few Chinese RAM integrated as a single unit).
And viola, you have an 800 ton vessel that has meaningful air defense and an offensive punch unlike anything in the planet. The main cost would be the SAM. If this can be made locally (what happened to the Italian sams bought by the PAF with "TOT"?)