Choosing between Indo-Western and traditional Indian dress is choosing between two different statements. Traditional dress, a sherwani, a bandhgala, a kurta and churidar, says you're dressing inside a living tradition for an occasion that belongs to it. Indo-Western, a Nehru jacket with Western trousers, a Jodhpuri suit, says you're moving between two traditions and drawing on both. Neither is more correct than the other. The only question worth asking is which one fits the evening you've been invited to.
When traditional dress is the right call
Traditional dress is right when the occasion itself comes out of Indian tradition and dressing that way is part of taking it seriously. A Hindu ceremony, a temple wedding here in Chennai, Eid prayers, Diwali at home with the family. On those evenings traditional clothes connect you to what's happening in the room rather than setting you slightly apart from it.
It's also right whenever it's expected, which is more often than people assume: when the invitation says so, when the hosts' own context makes it obvious, or when the wedding's look is traditional enough that Western or hybrid pieces will stand out awkwardly in every photograph taken that day. If you're unsure, ask someone in the family. Nobody minds the question.
When Indo-Western is the better answer
Indo-Western works when the occasion itself sits between the two worlds and a single-tradition outfit would only be half right. An international business event in India where your Indian identity matters and Western professional norms apply. A wedding with an Indian ceremony and a Western reception. A professional evening where the cultural context is Indian but the default dress is a suit.
It's also the honest answer for men who are simply more comfortable in Western clothing and find the full traditional outfit, kurta, churidar, jutti, dupatta, unfamiliar and restrictive. A Nehru jacket over a good shirt and trousers does the job without asking you to navigate a dress tradition you don't wear often. Wearing something you're at ease in usually looks better than wearing something correct that you're fighting all evening.