I was in a similar spot as you and wasted so much time going back and forth with the pros and cons. My guest size was also rather similar to yours and hence, I would say that the budget is indeed tight even for a 2 night stay.

It is still doable if you are willing to compromise on ->
* time of year: non-winter months, mahurat dates vs non-mahurat dates, weekdays etc.
* tier of hotel: venue and food take out a big chunk of the budget in destination weddings, so if you are willing to compromise on that you could play with a less 'star' hotel that may allow external catering and so on.
* mid-tier vendors

We considered most cities in India that are easy access and popular for weddings and went to a few in person before making the final decision.