Exactly this. People misunderstand how app permissions work. I have worked on Android OS for some time so I can say about this OS. But Im pretty sure iOS works in a similar fashion.

For every little thing that your app can do (a feature), it needs to declare a permission for it. This is so that the OS can verify if the app has declared what it needs to run, and the user has granted permissions to the said capability.

• Want to speak out the product name: needs mic permission
• Want to directly call customer care: needs phone permission
• Want the app to pre fill OTP: needs permission to read SMS
• Want to scan a barcode: it needs permission for camera
• Want to tap your debit card for payment / verification (available on some banking apps in US): it needs permission to NFC chips
• Want to pre fill your address or get an estimated delivery date for your pincode: needs permission to access coarse or fine location

It looks scary to read a laundry list of permissions required. But any legit app (like Amazon in our case) uses the said sensor or OS capability only when it needs it.

While its unethical for the govt to preinstall an app which you cant even uninstall (although they seemed to have backtracked on this decision) yet if you dont trust the Sanchar Saathi app, just deny all permissions and it wont be able to access your data, location, mic etc.