The manpage for init describes the contents of /etc/default/init, and says:
CMASK The mask (see umask(1)) that init uses and that every
process inherits from the init process. If not set,
init uses the mask it inherits from the kernel. Note that
init always attempts to apply a umask of 022 before creating
a file, regardless of the setting of CMASK
init starts or restarts core service components and processes, so the CMASK affects the permissions of these and any daemons spawned by init. In particular, daemons creating new directories would use this CMASK value as their umask.
The umask setting in /etc/profile will apply to logged-in users, unless overridden by their own dot-files.