Across global markets, gold has lost its glimmer.
Investors are fleeing the yellow metal, whose price has slumped more than 10 percent over the past three months.
But Indians are so gold crazy they're sacrificing their currency and their country's economy in the bargain.
By buying up billions of dollars worth of foreign gold, they are sending Indian cash overseas, disrupting the balance money entering and leaving the country, and thus driving down the value of the rupee. That in turn makes key imports *more costly*, and makes it harder for business to pay international loans.
"If for one year there are no gold imports, it will change the current account deficit story of the country," said Finance Minister P. Chidambaram on Thursday. "Indians think they are buying gold in rupees. Actually they are buying gold in dollars."
India is the world's biggest gold importer, soaking up a third of the world's supply every year. Gold is the country's biggest foreign purchase after oil. The impact? The current account deficit (the net outflow of money) is 5.4 percent of GDP, about double what economists recommend.
"I once again appeal to everyone to resist the temptation to buy gold," Chidambaram said. "This will show positive impact on every aspect of the Indian economy."
While India's current account deficit is too high, the real concern is whether enough money is flowing into the country to make up the difference, Bibek Debroy, an economist affiliated with the New Delhi-based Center for Policy Research, told GlobalPost. And there things get extra tricky.
"The worry for the government really is that whatever capital inflows we have are in the nature of portfolio investments" — such as stock purchases — "which tend to come and go," Debroy said. In contrast, direct investment in factories and in other ventures tend to carry long-term benefits, and the capital remains regardless of short term market fluctuations.
(Read More: More Drastic Steps Needed to Curb India Gold Bugs)
"So we should really be asking, 'Why aren't investments coming in?' — rather than picking on people who are buying gold."
According to Chidambaram, India's gold imports fell from an average of $135 million in the first half of May to $36 million in the second half of the month, but he neglected to mention the reason: This year the Akshaya Tritiya festival, the second-biggest holiday for buying gold, fell on May 13.