Google will know more about you than your wife does. Everything across your screens will be integrated and tracked.
Rectification of conflict between Google, an US Company and European Directive on Data Protection is not within the purview of Government of India.
As explained in the statement, the 2011 amendment of the IT Act of 2000 directs companies to protect private information and clearly disclose their policies on how the information will be used. Google has done this and as such the government does not need to intervene. Google's use and/or abuse of user information for targeting ads and knowing their users' behavior is not new, the government has better things to do than go after Google when nothing can be done.
PS: ZDNet's Violet Blue has a survival guide to the new changes just in case.