India might buy gold from citizens to ease rupee crisis

Firstly, India has a severe current account deficit because they import more goods and services than they export (see the US, UK, Japan).  As long as the country spends above their means, they will continue to run a deficit.  Secondly, Indian citizens are importing gold in record amounts due to the Rupee rapidly losing its currency exchange value from the government's overspending.  This should sound familiar to most western developed economies.

Indians are merely buying gold to protect their purchasing power against a sinking currency, issued by an increasingly profligate sovereign currency printing press.  The public has been doing this for centuries, as the country has been afflicted by incompetent and corrupt governments since recorded history.  Buying gold for Indians is beyond cultural--it's in their DNA.

Due to prodding from the Fed and Bank of England, the Indian government has attempted to discourage the importation of gold by its citizens, but raising the import tax five times to 10% has not deterred citizens from importing gold.  If anything, the government's strategy has backfired, as soaring demand has been met by record smuggling.

It is indeed tragically sad that India's government is attempting to impoverish its own citizens due to pressure from central bankers in the UK and the US.  Apparently, India still acts like a British colony.

http://www.reuters.com/article/2013/08/29/us-india-economy-gold-idUSBRE97S0IW20130829