In the recent Ask Valorant episode, the devs answered the concerns regarding the knifing accuracy and promised to give a closer look at the weapon in the future.
The knife in Valorant is the most unreliable weapon, as reported by most of the players. The hitbox is so small when knifing that it's almost unpredictable whether the knife will actually hit the enemy.
As a result, knifing has become a very risky task in Valorant. One may have to think twice before approaching a player for a knife.
In a tweet last year, the Riot devs did admit that the knife needs changes. However, the time for the change has not arrived yet.
Valorant devs say the knifing accuracy of lowest priority right now
As the devs approach the matter, they say the knives actually serve the purpose of a 'meme' right now. The only times a knife is used is either for psychological satisfaction or because one has run out of ammo.
Even if one may catch an opponent off guard multiple times in a match, it is highly unlikely that you can totally approach them at point-blank without the enemy being aware. This is the reason Valorant devs have currently kept the issue aside right now.
The devs also mentioned that the knife modification was supposed to arrive along with the Escalation mode. However, this might have caused a great delay, which is why they had to find an alternate solution to the mode.
Instead of improving the knife, a bonus speed/jump ability, a longer range and higher damage was awarded to the knife, which is now called the "Big Knife".
It is completely true that Valorant devs are constantly working on balancing out the other weapons of the game, which are much frequently used compared to the knife. This is the sole reason for delaying the tweaks needed for the knife.
Valorant is always very specific in shipping new stuff into the game. The producers could not delay the launch of the modes which were ready to be launched.
Nicholas Smith and Kyle Leach from Riot Games said the following about modifying the knife:
"We hope to come back in the future and give the knife a closer look and the love it deserves—we just need to figure out when it makes the most sense."