My reaction is that it's an adjective -- Indian what?

My response is that it's a short way to refer to Native Americans, acceptable in speech, and only in writing if the you use "Native American" in the first instance. It also means residents of India. (Even though there are probably more natives of India, maybe because my roommate is a Native American, I think of that first.) It also refers to a vast cultural lode of the work of Native Americans and (east) Indians.