Why do we need galvanic isolation with low power components?
Am I missing anything here?.


Yes. Mains voltage is lethal. The circuit measures and/or controls mains on the primary side without isolation. Protection of the MCU (And the user!) on the secondary side requires galvanic isolation from mains voltage.

You may also want to check where primary GND is connected to, it is probably not protected Earth (PE) but at a line level.