A crucial question when thinking about why the reaction to the Indian test was what it was, is why it was not something small, simple, and obvious. What did the Indian atomic establishment actually do that the existing system could not deal with? When Canada agreed to supply a CIRUS reactor to India in 1955, the reactor from which spent fuel was reprocessed into plutonium used in the 1974 explosion, the expectations regarding safeguards were different. The agreement between Canada and India included only bilateral safeguards, and "Ottawa attached no strict safeguards on how the plutonium produced by the reactor would be used, other than obtaining a commitment by India in a secret annex to the treaty that the reactor and resultant fissile materials would be used only for peaceful purposes" (Perkovich 1999: 27)
We can see a similar attitude towards safeguards in the agreement that the US supply heavy water to India in 1956, subsequently used in the CIRUS reactor, which had no formal safeguards whatsoever.
However, because the potential for diversion and other proliferation activities was obvious to many involved, an entire system of safeguards including the IAEA was created and widely instituted in between 1955 and 1974. So an entirely reasonable reaction to the Indian test could have been to point out the distinction between the unsafeguarded, or inadequately safeguarded, CIRUS reactor and all of the other safeguarded reactors from which fuel had not been diverted. The lesson might have been that safeguards were very important and should be part of nuclear supply agreements in the future so as to avoid what happened in the Indian case, which could be described as an exploitation of the lack of safeguards. Of course, by 1974 this was already a default position, as enshrined in the NPT, such as in Article III.
Another potential feature of the Indian situation that could have been identified as the key proliferation concern could have been the fact that the CIRUS reactor was a heavy-water moderated reactor using natural uranium (U-238) to produce plutonium. This type of reactor produces twice as much plutonium per megawatt-day, with a higher proportion of weapons-usable Pu239 (as opposed to other isotopes, especially Pu240), than does a standard light water moderated reactor (Feiveson et al 2014: 35). Given this, one potential reaction might have been to demonize heavy-water moderated reactors as opposed to supposedly “proliferation-resistant” reactors.
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George Perkovich 1999. India's Nuclear Bomb: The Impact on Global Proliferation, University of California Press.
Feiveson, Harold A., Alexander Glaser, Zia Mian, and Frank N. Von Hippel. Unmaking the Bomb: A Fissile Material Approach to Nuclear Disarmament and Nonproliferation . MIT Press, 2014.