India's Rajan: 'We Can Pay The World In Gold'

Besides slowing growth, many have been watching two data points keenly. The first is the nation's current account deficit, currently at -5.07% of GDP. The other is its external debt which stands at 22% of GDP.

The current account deficit ballooned because of the nation's gold and oil imports.

And some think this is bound to get worse.

"As liquidity is expected to moderate, funds have been flowing back to the developed world from most emerging markets," writes Societe Generale's Patrick Legland. "This reversal of flow is further exacerbating the problem with the INR depreciating sharply, causing higher imported inflation and rising input costs, which are proving to be a massive blow to already waning growth."

India's central bank governor, Raghuram Rajan, said India has a reserve of $280 billion which is 15% of its GDP. "The country can pay three-fourth of its debt from its Forex reserves," First Post cites him saying.

"We bought over $60 billion dollar gold last year. $60 billion accounts for three-fourth of our current account deficit," he said. "If the push comes to shove, we can pay the world in gold."

Rajan also said that India will not approach the IMF for financing in the next five years, adding that countries only go the IMF when they are "desperate."

Dennis Gartman, of The Gartman Letter wrote that Rajan's comments along with heavy trading volume on Friday, unleashed a "powerful storm of selling."

Gartman writes that while, gold bugs think this is "central bank manipulation at work,' "from our vantage point, this selling looked like massive margin call liquidation that was forced." He writes that life for gold bugs is "getting tiresome."