The article states this is for finished jewellery, but not bullion. This is protectionism for the skilled Indian jewellery smiths. This should increase the amounts of industrial bullion required for import to meet the demand for jewellery.
I was in India earlier this year and I can guarantee that nothing the government can do will decrease the Indian's apatite for gold. Gold is fully ingrained in their culture. Nobody on Earth can undo a few thousand years of culture, with laws or restrictions.
Did you see where someone dropped a dime on two women trying to smuggle 20 kg of gold through Cochin International Airport from Dubai? They had special jackets with pouches to hold the gold bars underneath burqas. $939,000 in gold, and they got busted. They've only seized 23 kg of gold total at that airport in the last 6 months, so this shows things are really ramping up. Also, the profit if they'd gotten away with it would have been $97,000. (Profit for the smuggling ring that is, they were just mules.)
http://newindianexpress.com/cities/...r-gold-seizure/2013/09/20/article1793912.ece1 Here's a link if anyone is interested. CCP