Terraform init error: Failed to download module (local changes would be overwritten)

I have a brand-new local Terraform project that I have just cloned from gitlab. I have not made any changes to the code, but when I run terraform init I get the following error, repeated for every module in the project:

Error: Failed to download module

Could not download module " <module name>"
(<filename>.tf:<line #>) source code from
"git::<gitlab address>":
error downloading
'<gitlab address>':
C:\Program Files\Git\cmd\git.exe exited with 1: error: Your local changes to
the following files would be overwritten by checkout:
        README.md
Please commit your changes or stash them before you switch branches.
Aborting

Every module download fails on the same file: README.md. Again, I have made no changes to any files in the project.

My initial thought was that this might be related to a line-endling issue: I am using Windows, and the module files in the remote repository were created on a Mac. To address this, I ran the command git config --global core.autocrlf true (following the recommendations here)

I then deleted the .terraform folder and re-ran terraform init, but got the same set of errors.

What am I missing?

It seems like you are having the same issue mentioned here, which is more of a Git behaviour then Terraform. Try adding the short-term workaround mentioned in this Github issue (by adding --depth in your module source.

However, if it's running multiple git commands in series that exacerbates this problem then a short-term workaround (until this can be addressed upstream in Git) might be to set the query argument depth=1 in your source address, like github.com/foo/bar?ref=v1.2.3&depth=1. In the current implementation it happens that Terraform implements shallow clone mode by running git clone --depth=1 --branch=v1.2.3, which avoids the need for the separate checkout step although I don't recall off the top of my head whether Git will accept what looks like a tag name as a valid --branch= in this context, or whether it specifically requires a refs/heads/... reference.