This was a last minute decision before device went full mass production, what I have heard from industrial talk all this morning. Apple did want entry level iPad to have A17 Pro so transition to have all tablets and phones to have Apple Intelligence be complete, but unfortunately it meant raising the price to around $429. At that price range, it was too close to the iPad mini price point and Apple wanted price to be lower to be an entry level device.
Ultimately Apple wasn’t willing on sacrificing the price like they did with iPhone “essentials” line and downgraded to A16 chip. Apple still wants to bring Apple Intelligence to entry level iPads at some point soon, either through software optimization (they want to try to bring Apple Intelligence to A16 devices) or unfortunately wait till next year with A17 Pro chip having gone done in production cost.