This mystery is easy to solve for there is no mystery.

Index returns are pre all taxes where ETF returns are post taxes as ETF ( like all other FPI funds) have to pay both Long term and short term taxes to Indian govt. Same thing you can see in INDA US etf vs. Msci India Index.
These taxes are one reason India market is now less attractive for there are no such taxes- charged to foreign investors in any other country- so even if Indian Index does better than other countries indices, post tax returns from India get hit badly.