India will be fighting a losing game if it goes ahead with the permanent banning of cryptocurrencies. There are an estimated 17.5 million Indian citizens living overseas. These people could easily deal in cryptocurrencies and it will be almost impossible to track their dealings. Further these overseas Indians could assist the Indian residents in India to deal in cryptocurrencies too by helping them deal in crypto assets on their behalf. That multiplies the number of potential offenders many fold.
Besides, India is also home to a thriving black market and has been so for decades. If Indians could get away with the thriving black market, they could, of course, get away with a thriving black market in cryptocurrencies and will find way and means of doing so.
It would be better for India to legalize cryptocurrencies and then put in measures to control it.
For instance, India could issue a national stablecoin, a CBDC, say RupeeT, and make it mandatory that all cryptocurreny transactions must be done using RupeeT as the base currency and only through the Indian banks. They could also limit the number of cryptocurrencies to a select few of, say, about 100 only. That way they could simultaneously appease the population and handle the governments concerns.