the way as i understood,
if forex is made as legal in india, most people will try to trade, as usual, 95% of the traders fail, so india will lose USD. right?
here is my explanation
Most forex brokers accept USD, EUR or max AUD, JPY as deposits. So an indian trader has to deposit these currencies only. What happens when he deposit, 1000 USD, Indian governement needs to pay that 1000USD to the other governement from the forex reserves that it accumulated. When the trader loses, Govt loses that much forex reserves (even though the indian trader is paying the money, that will be in INR and Indian govt loses the forex reserves). 1000s traders like this will give a huge impact on the indian forex reserves. As india does not have a big reserves and even those reserves are used for buying oil and gold, India cant afford.
If the traders make money, they always bring in USD or EUR to india, but mostly it wont be the case,
This is my own interpretation, no facts nothing else :)