Estimating volumes would be a tad hard. It's very hard to do. For volume to grow, there must be a need for bitcoin trade, and people must take it up. Using selling points like it will never be frozen for 180 days like paypal, and selling it in to it-houses in India, should make sure that there's some uptake.

So I think the potantial is huge, after all there's 1 173 108 018 inhabitants in India...

What is bitcoin classified as in India ?

We should define it as a "product" or "commodity" of some sort, and list out points as to why it does not fit the description of a "virtual currency" (e.g., decentralized.. mined/produced all over the world ). then dealing with regulations should not be a problem, right?

That's part of the solution. But not entirely. For bitcoin to work at fullpotential there has to be a currency component to it. Besides, as another poster mentioned, a product attracts value/sales tax and if this comes in, there could be a possible way for the government to try and tax/categorize inflow of bitcoins.

What about selecting the non-fear route?

Just start, just get started trading, and then in parallel look into the legalities. Then, if someone complains, you could just point to that you're working with lawyers.

Also, there's a lot of people in India, will there be anyone in the govt. that has resources to have an eye on you at all ?

I think for exchange there is no volume in India. Something like spendbitcoins.com can quite functional.

good to know, but how it done practically, I got blank page on http://www.indiabitcoin.com/

I presume you have some processing form from bitpay on your website and when somebody pay you get money via bank from bitpay and then pay to guy who sell bitcoins to you.  well ... have you been down that road already. Recently usd transactions become requiring clearance before it can be credited. I have such transaction from MtGox already for 2 weeks still under clearance and not credited to my account. If you have current account on company then it is even worse, every transaction goes under scrutiny of your bank Forex department and have to be explained before it will be credited. The situation here is getting complete ...t
Only way I see as workable to get money from foreign exchanges is debit cards with IBAN.

 integrating payment tools for merchants, but where is merchants. just another born dead project.

it takes 20 minutes to integrate bitpay into prestashop.

Everything must start somewhere. If you want to start to make bitcoin grown i a country where it is not very known, you just have to start, talk to people you think may be interested, and go on from there. Credit cards were at one point something new that nobody used, and before that even a paper bill was something new that nobody used. Everything starts with an idea, then it builds from there. If everyone always dismissed something as dead from the get go, then nothing would ever change.

Keep working hard to advance bitcoin!

I once read the story about the brothers Orville and Wilbur Wright. For those uninformed, they invented the air-plane.

http://en.wikipedia.org/wiki/Wright_brothers for some more information.

Needless to say, few if any believed in what they were doing. Actually they were considered more as lunatics, even their own father said it was completely impossible to make an airplane fly.

They studied how sea gulls where glide flying and, so they wanted to create something similar, with propells attached to it.

They faced a lot of obstacles, but kept on pressing. Finally they had a plane that actually worked for short distances. Their father was a witness to one of their first flights, and he took of his hat, and his mouth was wide open.  His sons had made it.

Believing is the first step in doing anything. If you don't believe you can make it, you can't.

As we all know, aviation has advanced greatly since that time, not to mention what impact it has on the world.

It's not impossible that in maybe some decades that everyone will laugh about the fact that bitcoin was something that wasn't something that could succeed.

When you read something like this, https://bitcoinfoundation.org/blog/?p=63 , it's very clear that the banking system as it exists is hugely inefficient. Bitcoin or some similar technology could be the answer. Personally I think the market will embrace bitcoin once they see how agile and efficient it is.