This is why my hair stands up every time we have the "backdoored encryption" discussion -- we had, and probably still have, people in positions of power that think of encryption as something that should be regulated on the order that guided missiles are.
As a technologist, I agree with your view.
But in cases like sanctions, I think the "Let me show who has the power" mentality takes over.
So, a country (say USA) can pressure its companies (like Microsoft in 1998) to stop providing some features/services/products to have some leverage over the sanctioned country. The unfortunate pattern in history has been that politics wins over rationality.
Do you have some reference to something that suggests that this is what actually happened? I don't think the US government made Microsoft put weak encryption in export versions of IE because India tested a nuke.
I think you can't find it because it just didn't happen that way and you're misremembering something. The export-crippled cryptography in browsers was a real thing but it got there before the Indian nuclear test and for other reasons.
