I have my own ideology as to what the J-20 does, and how its designed to perform. I would be going off topic if I gave an explanation beyond what I'm about to blabber about here, but I feel like the tactic of destroying their airfields with munitions like the Brahmos, SCALP-EG, AASM HAMMER, RAMPAGE, and SAAWs (as were utilised in the latter half of Op Sindoor), would be the key to subduing the Chinese aerial advantage. By taking out their airfields, as they will no doubt try to do to ours (though we have a far higher saturation of ADSs on our side, as far as I am aware), we can greatly suppress their single greatest advantage over India, their massive advantage in the air, both technologically and numerically (I say suppress and not eliminate as they'll probably use their massive road/infrastructure development as emergency landing strips). The Rafale, as we've seen, is very good at the A2G role, and the sophistication SPECTRA will certainly help it, and us, significantly when it comes to SEAD/DEAD.
China, almost certainly, cannot focus its entire force on us (certainly not its 5th Gens, again, it comes down to my deduction of what the J-20 is meant to do). It has to keep a sizeable chunk of its armed forces (including its most advanced units, so the more modern J-20A/S and J-35As) at its borders with Taiwan, Japan and South Korea, in order to project its power and dissuade any American advances. I think the Rafale will still perform extremely well against their platforms like the modernised J-11s, J-10s, J-16s, and may have a fighting chance against the J-20s, if India assumes an offensive A2A posture and effectively uses its force multipliers. The real threats in my mind are things like the GJ-11, and their stealth wingman drones/UCAVs, their only real counter would be either a 5th Gen, something like the CATS Warrior, or the Ghatak/RPSV UCAV if equipped with AAMs. (I believe that the ROEs were behind our subpar performance in the air during Sindoor, which was contrasted by the brilliant usage of our ADSs)
Another major thing I've realised by looking at the recent conflicts is that most 5th Gens are honestly quite a middling choice of aircraft after you've both obtained air superiorty and once SEAD has been conducted. 4.5 Gens are many times cheaper to operate, are more rugged/resilient, require lower maintenance, have significantly higher payload capacities and are capable of carrying a far more diverse set of armament (which IWBs can constrain). Longer loiter + combat ranges also make them extremely useful for CAPs and long range strike missions in contested areas, where an MRTT or Tanker would be a prime target. IMO, 4.5 Gens hit that sweet spot of reduced RCS, endurance, operational availability, and heavy-duty capabilities. This is not to say 5th gen aircraft are not important, or that they are a fad of any sort. They will absolutely be essential for any first-tier air force, such as the IAF, and are certainly the future (along with UCAVs) of aerial warfare. Its just that 4.5 Gens will remain essential, in my opinion, for a very long time.
The Rafale deal, I believe, also upgrades our existing F3R fleet to the F4 standard, which would be highly beneficial. If I'm right, this deal does enable us to integrate our own weapons locally, but no more than that in terms of fiddling with the software. I absolutely agree that we should not put all our eggs in one basket, regarding Tejas Mk2 just yet. However, I feel like about 180~200 Tejas Mk2s would be sufficient instead of say ~300 for three main reasons, and a few other smaller points here and there:
1. I think the AMCA programme will aim to induct around 200~240 aircraft, and that will serve as the backbone of the IAF for years to come.
2. India might procure the Su-57 as an interim solution regarding 5th Gens. For us, it is definitely a better choice than the F-35 purely due to the fact that we will not need to surrender any sort of strategic autonomy or bend to the whims and fancies of the US. It is a very capable airframe, especially in the A2G role, far more so than the F-35 is as far as I'm aware. Despite the speculation around its RCS (which might not be wholly accurate either), the advantages it can provide us are substantial (A rapid induction/delivery timeframe, localised production, ToT, it meshing into the existing 30MKI's supply and logistical chains really well, and Indian upgrades/missiles amongst other things). Again, this is in part related to the point you made regarding Tejas Mk2 not being wholly mature.
3. In the future, there may be a surge in the usage of Wingman Drones/UCAVs like the Ghatak, and possibly the Dassault nEUROn, to supplement our 4.5 Gen fleet. Thus enabling them to at least go toe-to-toe with 5th Gen aircraft, this might just replace the need to induct as many manned airframes.