India just happens to have a mature and humane policy that lets them get away with it. Don't ever confuse our practicality in this matter with it being legal. It's quite possible and reasonable for GoI to turn around and clamp down - without prior notice - on anyone trying to exit with an Indian passport, asking for a US visa, and when told that they have a US passport, detain than minor and make the family go through hell for breaking the law. When that happens, a lot of people are going to dump on Indian law for being stupid or heartless, when they wouldnt dare play with US immigration law in the same manner.
As I understand (peripheral interest, mainly), AFTER the OCI was established, GOI did start tightening the procedures. Otherwise the "PIO" basically said, get a card that says that some ancestor had desi khoon and you can come and go as u please and stay for 6 months. This was way too loose.
So they started asking immigration authorities to enforce the requirement that you must have got your Indian passport cancelled when you got other citjenship - or else there are too many loose passports out there waiting for Dawood Gilani types to use.
For new OCI requests, they asked for proof of cancelled Indian passport. This is when the poo hit the turbines: Far too many desis had coolly ignored the LEGAL REQUIREMENT that you had to return your passport to be cancelled when you got some other citjenship. (Like the requirement that IRS has always had, that u have to report worldwide income if you are a US resident).
The fraud (and there is no other term for it) was 100% on the part of those who had not got their Indian passports cancelled. They basically stuck their middle fingers up at their Matrbhoomi when they got some other citjenship. Rude, lazy and dishonest.
Suddenly, there was a flood of these, with several ppl

that they no longer had the cancelled Indian passports. IOW, they (claim to have) simply thrown away the passport when they got the new citjenship. That was tough: they had no way of proving that they once held Indian citjenship, so how were they applying for an OCI? IMO GOI should have flat rejected OCI applications of such people, but GOI was very kind. Probably made them produce Or-e-jinnal Birth Certificates etc, I don't know (many had no way of proving that they were born, either..

)
Instead this flood created a huge backlog at Consulates, leading to massive protests and screaming at Indian Embassy and Consulates. Much of this popularity was well-deserved because the Babus do not observe their own procedures laid out on their websites: not the time for processing, not the process for enquiry, not answering phones intelligently, and certainly not responding to customers. They only moved their behinds and showed some life when they were cavity-searched, or their privilege of having ayahs etc was challenged.
Of course this has always been the case. Even when my Evil 6th Coujin (E6C) applied for a vija, because OCI was delayed several months beyond the stated processing time, the vija application also dragged on for months, until departure date started looking. After exhausting other means, E6C sent a gentle enquiry to a local neta who was on phone/first-naam basis with Conjul-Jarnail in Houstonabad.
Whammo! Vija appeared FedEX next morning. I sent a thank-u note to the Babu, also ignored. They REALLY try to be loved by the Peasantry, don't they? Anyway, now the backlog seems to be cleared (I hope) until the next panic.
As far as the children thing is concerned, I don't see what the PITA is all about: GOI policy seems sane and minimizes bureaucracy. As I pointed out in my first response on seeing AmberG's post of the GOI language, I was amazed (very positively) that a government would say things like "since there is no point in harassing children" to decide on an otherwise messy issue.
Thanks to all, I have now learned a new Latin name, courtesy of Suraj:
Sus DNAnus Pakus (SDP)
This is the defining feature of a paki. My yuwar goat droppings be perfectly spherical, as the full Moon above Karachi.
Desis OTOH appear to have a defining characteristic:
Chalta Hai as long as one's own immediate interest is not bothered.
This is at once a tremendous asset and a really irritating liability if one has to get someone's attention.