That would hold true if the transfer had been completed. PayPal is able to stop the process and credit my account back means that money has not actually left their system. I agree the underlying mechanisms are much more complex but I also understand that what we see in that screenshot is just entries in a database and no real transfer or conversion of money has taken place as yet. If it had happened a day later then I would accept the fact that the process was well underway and some money had changed some accounts.
The point is PayPal decides right at the time of beginning with the withdrawal how much in Rupees it is going to pay me. So if it decides for some reason it doesn't want to pay me, it should again give me back the same USD.
I'm not entirely sure I follow everything that's happening here, but it seems to me that what you're requesting would, if nothing else, allow a currency trader to use PayPal to conditionally do conversion only if they were making a profit. PayPal is doing the conversion at the time at which it is responsible for the conversion rate, which seems like the "right" thing to do. Admittedly, this results in subpar outcomes for people in India, but I'm not sure they can do anything different.
The point is PayPal decides right at the time of beginning with the withdrawal how much in Rupees it is going to pay me. So if it decides for some reason it doesn't want to pay me, it should again give me back the same USD.