Bhindranwale was indra gandhi's weapon that backfired.
Although the declaration of emergency saved her position, it had a severe impact on her image she gained from indo pak war 1971 and her victory in general elections before emergency. To make matters worse, the corruption awareness campaign led by JP narayanan took a bad toll on her image. This resulted in indra loosing in 1977 elections. Infact, she lost in her own constituency.
That's when Sanjay gandhi went searching for a weapon to bring down the janata party government. Zail singh advised Sanjay to bring down akal dal instead of going face first at janata party directly. To bring akal dal down, they needed a new Sikh leader who was ferocious, religious and controversial enough to cause dispute between akali dal leadership. They found bhindranwale!!!
Now Congress back to power in 1980. But by the time bhindranwale had turned against congress and indra didn't expect this escalate to the level of operation blue.
Congress again lost against indra's own daughter in law in a constituency near Lucknow. Bhindranwale's men went on rampage and gunned down people one by one in their hit list (including jounalists to superintendent of police). The rampage was so powerful that the IG openly accepted that he couldn't restore morale in police force of the state.
She tried to impose presidents rule in Punjab to restore normality and her image but failed. Sanjay too died in plane crash. Rajiv’s influence in the party didn't show any signs of hope. She was under pressure to restore faith on her power to keep country in one.
To make matters worse, army major shahbeg singh who played key role in indo-pak 1970, an expert in guerilla training joined bhindranwale when he was backstabbed by indra. The duo procurred automatic rifles to rocket Launchers and fortified the golden temple and made it bhindranwale's headquarters.
Bhindranwale established golden temple as his own territory and even was ready to face the indian army upon attempts of army operation.
Now indra was in a check mate. If she withdraws at this point, it means bhindranwale’s victory and her end in politics. If she got him eliminated, this would severely backfire and invite hatred and dissatisfaction from the public. That's when she pulled the trigger against bhindranwale as last attempt to save her and rajiv’s political career.