McGrath went from being interviewed for the captaincy last month to being left out of Australia's team altogether for Sunday's series-opening T20 loss against India.
Having deputised for the retiring Alyssa Healy 15 times since 2022, McGrath was at this point last year considered the front-runner to replace the wicketkeeper once she retired.
But a difficult 2025, culminating in an ODI World Cup where she averaged 13.75 with the bat and was barely used with the ball, left McGrath admitting her confidence was low.
Selectors then made the tough call to drop the 30-year-old for Sunday night's match, with Sophie Molineux having been named as Healy's long-term successor and Asheligh Gardner vice-captain alongside McGrath.
Asked if dropping McGrath to bring in a recalled Nicola Carey was one of the hardest calls she has had to make as coach, Nitschke said: "I think so. It's a really tough one.
"Tahlia has been a massive part of this team for a long time and obviously has captained in Midge's (Healy) absence at times and is a fantastic leader.
"Her international T20 record is actually really good, and she's done a good job for us over a number of years and unfortunately she's got squeezed out.
"So to leave her out was a tough call. But Nic Carey's been playing really well."
McGrath's omission came as selectors also left out veteran seamer Megan Schutt and hard-hitting middle-order batter Grace Harris.
Beyond the three T20s in this multi-format series, Australia have just three more against West Indies next month before they arrive in England for the T20 World Cup.
That tournament is of particular importance to Australia, after being dumped out in the semi-final stage of the most recent T20 and ODI World Cups and surrendering both trophies.
Since admitting she was going through the toughest part of her career after that World Cup, McGrath has made scores of 47, 58no and 48 for South Australia in 50-over matches.
"She's played six WNCL games since December, so that's been great for her confidence," Nitschke said.
"And I think just touching base and making sure that she knows that we care about her, we want to see her back.
"But she's been able to spend that time which has been invaluable for her with both bat and ball.
"That time back in the domestic cricket has worked wonders for her and her confidence as well."
With Australia bowled out for 133 batting first at the SCG on Sunday night, India looked in control at 1-50 before rain set in after 5.1 overs and handed the tourists a 21-run win on DLS.
That means Australia are trailing a bilateral series at home for the first time in a decade, headed into Thursday night's second T20 in Canberra.
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