So what is even the necessity for starting such a karmic loop?
According to the Brahma Sutras, karma is beginningless; the Jivas who are trapped in samsara have always been in it.
Ramanujacharya has stated in his commentary on the Brahma Sutras:
Although the individual souls and their deeds form an eternal stream, without a beginning, yet non-distinction of them 'is reasonable' (i.e. may reasonably be asserted) in so far as, previous to creation, the substance of the souls abides in a very subtle condition, destitute of names and forms, and thus incapable of being designated as something apart from Brahman, although in reality then also they constitute Brahman's body only. If it were not admitted (that the distinctions in the new creation are due to karman), it would moreover follow that souls are requited for what they have not done, and not requited for what they have done. The fact of the souls being without a beginning is observed, viz., to be stated in Scripture,'The intelligent one is not born and dies not' (Ka. Up. I, 2, 18); so also the fact of the flow of creation going on from all eternity, 'As the creator formed sun and moon formerly.'
So, one cannot attribute cruelty to Brahman, since creation is based on the Jiva's karma, which is beginngless.
Why couldn't all beings have the default state of Moksha when they began?
There are 3 categories of souls according to Ramanujacharya's doctrine:
1) Nitya suris, or those who are eternally liberated
2) Muktatmas, or those who were once in samsara, but are now liberated
3) Baddhatmas, or those who are currently in samsara, and will be liberated
So, the only souls who have the default state of moksha are the nitya suris.