Diode not behaving as short circuit
Initially, the inductor resists the change of current, making the diode the path of least resistance and causing it to carry most of the current. When the magnetic field in the inductor builds up, the voltage across it decreases as it allows more current to pass. The diode has a forward voltage drop (typically 0.6V) to account for, so it won't conduct any current after the voltage across the inductor falls below the diode's forward voltage.