I'm not sure to what extent the French downgrade stuff. Making an export model is quite expensive, so they instead put software locks on it instead and then sell the unlocks as upgrades after some time has passed. The Americans do the same, as do other Europeans. In the meantime, the captive forces would have received more advanced upgrades.
Some electronics are downgraded, like the French use RDY-2 radar for the M2000, whereas what we operate is the downgraded RDY-3. The Rafale may have some downgrades as well.
Our Mirage 2000 I and Mig 29 UPG after Upgradation
Were called as the Best versions of themselves
Both aircraft are more advanced than their captive counterparts, but that has more to do with the amount of time that has elapsed since their previous major upgrades. The French and Russians will make more advanced versions based on our upgrade model for themselves, if they are actually going for the upgrades.
When it comes to Mig-21 Bison, MKI, T-90 etc, we are paying them to develop new technologies for us or developing our own stuff, independent from what the Russian forces use in order to prevent ridiculous downgrades. In other cases, we are hiring the Israelis to upgrade older Russian hardware in order to keep it more advanced, like the M-36 gun upgrade and the AESA radar upgrade for the Shilka.
And in case of Su 30 upgradation , why cannot we install whatever latest is available
We can. A whole host of weapons have been introduced on it, including two foreign weapons, ASRAAM and Spice. The IAF became lethargic when it comes to the BVR missile, that's all, otherwise they were looking at both Meteor and I-Derby ER as our future BVR options. The Russian BVR option will be inferior to both due to the downgrades.
Even existing electronics have been seeing consistent upgrades, EW suite, mission computer, comm systems etc. Only the Russian supplied systems are pending significant upgrades, like the AESA radar upgrade and new IRST.
Almost the entire electronics suite of the MKI MLU will be Indian. The cockpit design is also Indian.