India’s Hidden Gold: How Tokenisation Could Shrink the Trade Deficit

After weeks of procrastination, I finally visited my bank locker to return some gold jewellery taken out for a family wedding. As I waited almost 40 minutes for my turn, I noticed how crowded the locker area was – soaring gold prices had brought many people to check their holdings.

When I opened my own locker, I realised a harsh truth: a large part of what I owned would probably never be worn again. My child and I have outgrown several pieces, and I had no interest in exchanging them for new jewellery. The Sachin Tendulkar ad urging Indians to exchange old gold for new and “help India’s economy” echoed in my mind, but they did not speak to people like me. Many of us would happily tokenise some of this idle gold rather than convert it into more physical jewellery.

Why gold matters for India’s external balance

To see why this matters, let’s start with India’s current account deficit (CAD). The CAD measures how much more foreign currency the country spends on imports, investment income, and transfers than it earns from exports and remittances.

For calendar year 2025, India’s CAD is likely to be around 0.6–0.7% of GDP, a broadly comfortable range thanks to strong services exports and remittances that offset part of the merchandise trade gap. The real stress point is the goods trade deficit, which is expected at about USD 365–370 billion in 2025. Oil is the largest contributor, but gold is not far behind: India imported about 840 tonnes of gold in 2025, worth roughly USD 39–40 billion, adding more than a tenth of the trade deficit on its own.

This is paradoxical because India is already sitting on a mountain of gold. Estimates put total national gold holdings – across households, temples and official reserves – at around 34,000–35,000 tonnes. Yet we continue to import hundreds of tonnes every year.

Why the “exchange old for new” pitch didn’t work for me

Sachin Tendulkar’s exchange campaign asks Indians to bring old jewellery and upgrade to new designs. That is useful if you actually want new jewellery. But what if you:

• Don’t want more jewellery,

• Don’t want to keep old pieces you will never wear, and

• Still want to retain exposure to gold as an asset?

The obvious alternative is to sell old gold and hold cash, but then you lose the gold exposure you may value as a longterm store of value. A better option would be to exchange old jewellery for digital tokens backed by physical gold, issued and tracked on a regulated blockchain.

In that model, you:

• Transfer your idle gold to a regulated vault.

• Receive goldbacked tokens representing a specific number of grams.

• Can sell, pledge, or transfer these tokens easily, and redeem them for physical gold when needed.

You keep the investment, gain liquidity and transparency, and free yourself from storing outdated jewellery. At the same time, the country benefits because mobilised domestic gold can substitute for fresh imports, reducing the trade deficit.

Tokenised gold: the missing domestic link

Globally, tokenised realworld assets – especially gold – are seen as a major growth area in financial markets. India has cautiously embraced this trend, but only inside GIFT City, under the International Financial Services Centres Authority (IFSCA) and it’s in a sandbox stage.

Within GIFT City, regulated entities can issue gold tokens fully backed by vaulted bullion, using permissioned blockchains, strict KYC, and audited custody. However, these products are effectively ringfenced from the domestic retail market; ordinary residents cannot yet use them as a mainstream savings product.

That is a missed opportunity. In 2025, India imported about 840 tonnes of gold – barely 2% of what the country already owns. If India could reliably mobilise just 400–420 tonnes of idle household gold each year and use it instead of importing bullion, the country could save roughly USD 30–31 billion in foreign exchange at current prices. That is almost a tenth of the merchandise trade deficit.

What India must build next

The economic case is clear; the bottleneck is institutional. India needs to invest in:

• Regulation: A unified framework, led by RBI/SEBI/IFSCA, defining tokenised gold as a regulated product

• Technology and custody: Nationalscale, audited vaulting and tokenisation infrastructure with strong cyber and operational security.

• Compliance and investor protection: Robust KYC/AML, clear disclosure of fees and risks, and strict rules on backing, redemption, and marketing 

Somewhere in millions of bank lockers across the country sits gold that will never again be worn, gifted or exchanged. Treating that metal as a dead asset is an economic choice, not a cultural necessity. With the right regulation, tokenisation can bring this dormant wealth into the financial system — reducing imports, conserving foreign exchange, and modernising how Indians hold their oldest store of value. If done right, tokenisation can turn a portion of  India’s dormant 35,000tonne gold hoard into a productive financial asset.