> It doesn't make sense to me why European countries might trust Indian subsidiaries of American companies

Because most European companies are paying lip service to EU sovereignty because of how tightly coupled they are to the US. Look at how the EU-China spat led to Nexperia China's de facto decoupling which shut down the EU automotive industry for a couple months. It's even worse with regards to American dependency.

> Why not get Independent Indian developers and the startup culture established around it

Because the dependency then comes from India. An "Atmanirbhar" EU means having the capacity for self-reliance almost entirely within the EU and without a dependency on non-EU states like India or Israel.

> It still doesn't effectively prevent the lock-in or worries in case of a geopolitical spat for EU in reality but only on the papers

European companies (like all companies) don't care about open-source once they become dominant in a segment - for example ERP and SAP and SUSE Linux, and industrial systems.

> To be honest, I am open to open sourcing much of my products (ideologically) but the problems I feel in open source is that its hard to even make a developer salary comparatively even in India

That's the reality of OSS. There's a reason most OSS contributors for critical projects are employed by the organizations that heavily utilize that project (eg. Python and Google, OCaml and Jane Street).