If Indian nuke cannot deter the pakis from launching a conventional terrorist attack every month, why on earth would it deter them from a nuke attack,
The question you asked is rather disingenuous.
Nukes, by their very nature, are meant to deter/respond to a very strong tactical conventional manouvre ( FU ) , or to deter a nuclear strike ( NFU ).
In other words, their use is to deter serious
damage to socio-economic and military infrastructure.
Subconventional warfare and terrorist threats with plausible deniability are not
covered under the "deterrence" paradigm.
The only response that works - short of threatening a full scale war ( as was done during Parakram ) under such situations - is the implied threat, or actual demonstration, of a tit-for-tat deniable subconventional warfare and terror reposte.
That's precisely what was used against Pakistan in Karachi during the Khalistan episode of the 80s.
The attack on N was a miscalculation, but a miscalculation that resulted from Nallapayyan's own reasonable and "forgiving" behaviour.
This "forgiving" image of India is rather over-hyped.
Pakistan has been forced to make quid-pro-quo concessions every
time it mistakenly upped the ante.
Although this falls short of the "kick it in the groin" demand from hyper-nationalists here, it is the results that count.
The strategy of this game is to limit Pakistan's range of options and tire it out, while isolating it diplomatically with regards to J&K.
By any and all measure, India has been reasonably successful in this endeavour.
If the GoI cannot use India's nukes to deter such "bleeding tactics", as you have euphemized, why do they need nukes?
Once again, this emotional outburst is not entirely a logical one.
India is not
a subscriber of the Nuclear Utilisation Theory ( NUTS ) doctrine so carefully nurtured by the US and Soviet Union.
India's nukes are there as a currency of power (great power status), as a simple but effective response against nuclear blackmail by hostile nations, and for a calibrated punitive response when MAD(Mutually Assured Destruction) deterrence fails.
As for the Pakistani tactics of "thousand cuts", the deterrent response lies elsewhere ( see above ).
Also, while RMA modifications would take some years, the groundwork for a fast, effective Cold Start Doctrine has already been laid.
It may not satisfy your appetite for a final crushing showdown ( "Ispar Uspar" according to ABV ), but it is an effective policy of carefully calibrated escalation called "managed conflict".
To make sure that this escalation ladder is fullproof and workable, India needs the nukes as the NFU backup.
Does that answer your question ?