What are the limitations of using Magnetic induction rather than acoustic communication in underwater communication
Actually, magnetic induction is a current research topic for underwater communications, see http://bwn.ece.gatech.edu/papers/2015/j14.pdf. Also, this paper includes a nice comparison of underwater communication strategies, including electromagnetic waves, acoustical communication, and optical communication. 

One major disadvantage of magnetic induction is the short communication range below 100 meters. Acoustical communication has a range that is much larger in the region of kilometers.