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ARTICLE AD BOX
Summary
Gold’s appeal in India can’t be contested. But if the country wants to reduce imports and put its household hoards to productive use, tokenized gold that is traded on RBI’s e-rupee platform may be an idea whose time has come.
Prime Minister Narendra Modi’s nudge to resist gold purchases has been followed up with a policy disincentive. On Wednesday, the Centre more than doubled import duty on the precious metal to an effective rate of 15% from 6%.
The objective is to deter local buyers by making gold more expensive, so that imports reduce and ease pressure on India’s balance of payments, burdened as it is by a war-inflated oil bill.
After crude, gold is India’s second largest import by value; fiscal 2025-26 saw over 721 tonnes of it shipped in. Although this was a 5% dip in weight, a price upshoot spelt a 24% spike in our forex outgo—to almost $72 billion.
No wonder the government wants to curtail shipments, an aim that weak capital inflows lend extra urgency to. But tariffs are a blunt tool that could have unforeseen effects.
Duty evaders could hunt out illegal channels, for example, and ‘gold trips’ to Dubai might mask forex spending on the same stuff as leisure.
But then, since duty barriers have been used in the past (even in the post-covid era as a temporary measure), we can assume New Delhi is aware of those risks. Indeed, policy efforts have long been made not just to lighten the shiploads we import, but to ‘dematerialize’ gold as a way to unlock its value for productive use.
It is a proven store of value, no doubt, but unlike a financial asset, it yields no return or income for investors since the money invested in it turns idle from the economy’s point of view.
In 2015, India tested a gold monetization scheme designed to draw jewellery, coins and bars out of homes into banks in lieu of interest payments. Like earlier gold deposit packages, it made little headway. As the same items could not be retrieved, heirlooms got lost. Instead, ornaments need to be pawned the old way, as seen in the gold-loan boom.
Around the same time, India also test launched sovereign gold bonds (SGBs), which offered investors an annual interest of 2.5% on the principal over and above the gain in gold’s market price over their tenure. This device gave households a chance to diversify their asset portfolios to gold without any need of imports.
Yet, it was a blow to the exchequer, which had to bear the brunt of price escalation over that period. New tranches of SGBs have not been offered. Of course, other ‘demat’ forms of gold exist, some of them actively traded.
Meanwhile, research suggests that India’s mass relationship with gold has evolved for its role in financial security—as a fallback—to slowly outweigh its cultural appeal. Even if ornamental use and ritual buying endure, it may be getting easier to convince homes to part with their physical stock.
The actual glitter of what’s kept safely within reach is hard to replace as an assurance, but that’s exactly why trust is a key enabler.
It’s also why the digital ledger technology that underpins the Reserve Bank of India’s (RBI) e-rupee project could plausibly be used to attract gold and its investors. All that RBI would need to do is tokenize the metal.
Ideally, it should first make digital tokens—think of crypto-type coins that serve as proof of ownership—out of financial assets like government bonds, so that retail investors can trade these swiftly and safely under its supervision.
But RBI could also issue e-tokens against gold deposits, thus minting digital coins for households to trade and invest in (like other assets).
A safekeeper doesn’t get more trustworthy than the central bank. Since RBI has its own bullion, it could explore various low-risk models.
English (US) ·