I just recently played my first Assassin's Creed game when Ubisoft gave Unity away for free, and I am still amazed about the huge number of pedestrians in the city. Granted, you can't talk to most of them either, but they really didn't look too much copy and paste at first sight and they went about their business to make the city seem alive!
I was talking about pedestrians in some GTAs or The Witcher 3 copy-pasted npcs that lack stats or other features uniqueness OR true procedural generation of those features so in diverse spawning points the same cloned models are present with ZERO diversity or personalization. In some places 4-5 clones can be present together. Moreover, this isn’t the only way to implement generic/non unique npcs: First, there are several games with a limited set of appearance archetypes, but that include personalization in other features as dialogue, stats, loot or name. Other games include true procedural generation for every generic npc in both appearance and stats/dialogue/loot. Finally, some games with some degree of the previous solutions also add many functionalities / game mechanics to generic npcs.
I guess you can do that with a development team of 500+ developers working on the game.
How many has Cyberpunk 2077? More than 400.
Underrail was developed by one guy and has the same amount of unique npcs than TW3. Kenshi was also mostly developed by 1 guy and the thousands of generic npcs are different and not copy-pasted but procedurally generated among a very complex set of features adding also many more functionalities to npcs.
But again, the main problem in TW3 generic npcs (or Mass Effect, or most GTAs) is that generic npcs could be procedurally generated with different looks, stats or loot, and that they can have some type of functionality or interactivity without spend a lot of work or time at all in development.
This depends on what you want to portray. Want to portray small village, prison camp, post-apo wasteland? Yes you can have small number of NPCs and each unique and handcrafted with custom dialogue.
Want to portray megalopolis with millions of inhabitants? Then most of them are going to tell you to fuck off when you bother them. Just like in real life!
Yes, I totally understand and accept the use of irrelevant npcs in some type of games, but it's not necesary for them to be copy-pasted or totally lack interactivity or relevant functionality to the player experience. As in your real life example, non relevant people in your personal story are not clones but people with different appearance and features but less developed or complete in your experience (exactly as som egames do when they procedurally generate different looks, stats or loot) and can be used as tools for simple tasks (as Daggerfall npcs were: Ask for directions, report some crime that you commited, etc).
Include in a game some sort of procedural generation of appearance, stats or items needs far less time or people working than create the most ultra-realistic models, light effects or animations. So maybe is only a problem of focus and preference by developers.