Tokenization: India’s Missing Rail to a Viksit Bharat

From Digital India to Capital India

In the past decade, India has executed one of the most ambitious digital transformations in human history. JAM (Jan Dhan–Aadhaar–Mobile), UPI, DigiLocker, CoWIN, ONDC, GSTN - each has moved India closer to its goal of becoming a digitally empowered society and knowledge economy. But if we’re truly serious about achieving the Viksit Bharat@2047 vision - not just digitizing services but fundamentally transforming how value is created, distributed, and governed - we must now take the next step: From digital records to tokenized assets to programmable capital.

From Digitization to Tokenization: A New Phase of Reform

Over the years, we’ve built Aadhaar for identity, UPI for payments, and eKYC for onboarding. These are monumental. However, most of this digital transformation - whether in banking, welfare, compliance, or trade - has primarily improved the speed and reach of our legacy systems. The underlying rules, rights, and enforcement still largely reside outside the digital realm - in PDFs, legal agreements, or manual checks. While our regulators (RBI, SEBI) are already exploring aspects of Distributed Ledger Technology (DLT) and asset tokenization, a concerted national strategy is now essential to move beyond foundational explorations. Tokenization is different. When you tokenize an asset - say, an invoice, a subsidy, a bond, or a solar energy credit - you encode its legal, financial, and governance properties directly into software.

Tokens are not just digital records. They are programmable units of value, enforceable by code, auditable in real time, and transferrable without friction. Just as Aadhaar gave India identity rails, and UPI gave us payment rails, tokenization gives us asset rails - a native digital substrate for how capital is created and flows in the economy.

Tokens can be used to represent a government subsidy that can only be spent at authorized merchants, a tokenized invoice that earns early payment discount from financiers, a carbon credit that auto-adjusts value based on satellite-monitored emissions or a bond that enforces payout logic based on real-time revenue data. Each of these is not just data - it’s an active financial instrument, able to carry rights, restrictions, and compliance logic across its lifecycle.

What is “Programmable Capital”?

Traditionally, capital is passive - cash, shares, debt - where the meaning and enforcement are off-chain, governed by legal documents, courts, and intermediaries. With programmable capital, those rules become machine-readable and self-executing.

A token: knows who can hold it (e.g., only KYC’d Indian residents), what rights it carries (e.g., “redeemable for 1kg rice”), can define yield logic (e.g., “2% if held by women-led MSMEs”), can auto-expire or rebase (e.g., based on inflation or carbon price), can even vote, upgrade, or be clawed back in certain cases.

This is not just cryptographically enforceable ownership of an asset. It is a new way of thinking about capital - as software. Programmable capital offers trust-minimized enforcement, where rules are transparent and automatically executed by code, significantly reducing reliance on multiple intermediaries and potential for human error or manipulation. It also has the potential to enhance data privacy through selective disclosure mechanisms and bolster security by leveraging cryptographic principles inherent to DLTs.

The Road to Viksit Bharat: Digitization → Tokenization → Programmable Capital

Let’s map this journey.

Phase 1: Digitization (Already Underway)

UPI, Aadhaar, DigiLocker, Account Aggregator, e-Sign - these have laid the foundation. India is now a global leader in Digital Public Infrastructure (DPI). Impact: Improved inclusion, faster & cheaper digital payments, reduced leakages, faster government delivery.

Phase 2: Tokenization of Real-World Assets

This converts static digital records into programmable, transferable capital. Tokens can represent MSME invoices, DBT entitlements, Agricultural outputs, Carbon credits, Tokenized compute power or Municipal green bonds. The government can enable legal recognition of tokenized assets (e.g., invoice as valid claim), custody framework for bearer or programmable tokens, licensing for tokenized deposits or bills of exchange, and tokenized asset pilots by PSUs and state governments.

Impact: Unlocks liquidity in underserved sectors, reduces friction in welfare and credit, expands access to new forms of productive capital.

Phase 3: Programmable Capital

This is when tokenized assets become self-executing instruments - fully aware of their compliance, redemption, ownership, and distribution logic. India should build programmable capital sandboxes (for testing programmable grants, bonds, and DBT schemes), digital asset lifecycle regulation (covering issuance → ownership → secondary transfers → redemption), state/PSU adoption(tokenized infra bonds, smart subsidy disbursals, milestone-based wage payouts), integration with GSTN, CBDC, e-invoicing, and ONDC rails (ensuring interoperability standards across various digital public infrastructure components), investment in infrastructure development, skill enhancement, and legal reforms(to facilitate this transition).

Impact: Automated compliance, real-time enforcement, lower fraud, faster capital movement.

How can this transform India?

Let’s take real programs that matter to India’s future: DBT & Fertilizer Subsidies (tokenized entitlements redeemable only at certified vendors, with expiration logic), PLI Schemes & NREGS(payouts only upon GPS-verified milestones or attested delivery), MSME Liquidity (tokenized GST invoices tradable for immediate liquidity - no need for collateral-based loans), Education & Skilling (verifiable skill tokens usable for jobs, upskilling credits, or migration programs), and Carbon & Green Assets (small solar and rural forestry projects can now participate in carbon markets)

These aren’t hypothetical. They are natural evolutions of the Digital India rails we’ve already built.

What This Could Mean for India's Economy?

India’s gross capital formation is 30–34% of GDP, yet much is locked in illiquid, idle, or slowmoving assets. Tokenization + programmable capital can unlock idle assets(real estate, receivables, compute capacity), accelerate velocity (instant, peer-to-peer capital movement), automate flows (grants, loans, interest - with built-in rules), expand access (SMEs, rural talent, gig workers gain new financing options), and bring in global capital (by offering compliant digital primitives, India can attract a new class of global capital and reinforce its position as a global financial hub).

Conservative estimates suggest tokenization could lower cost of capital by 2–4%, and increase participation of underbanked sectors by 25–30%. Capturing even 10% of GDP via tokenized rails could add $250–400B to the economy in the next decade.

Tokenization is not just another digital transformation project. Where digital transformation improved speed, tokenization rewrites the structure of capital itself.Where digitization offered transparency, programmable capital offers trust-minimized enforcement

This is structural financial innovation - not UI for legacy systems.

Tokenization also fills a critical gap in the emerging AI economy. While AI can generate insights, it still needs trusted rails to execute value - from micro-payments to royalty splits to revenue shares. Tokenized assets can enable real-time attribution and royalty distribution for AI-generated content, pay-per-use access to AI models, verified via on-chain logic and trusted data marketplaces - where tokenized data comes with rights and restrictions. This makes tokenization the transactional backbone for a digitally intelligent economy.

The Call to Action

We must not treat tokenization as a fringe crypto experiment. It is a national opportunity.RBI, SEBI, and MeitY should create regulated sandboxes for programmable finance. Startup India and DPIIT can incubate open-source token infrastructure.States can run pilot programs for tokenized assets in welfare, employment, or municipal finance. Institutions like IIMs, NIPFP, and IITs can research on-chain law, programmable finance, and token governance.

India doesn’t need to copy the West. We can set the gold standard for ethical, inclusive, programmable capital systems, rooted in our Constitution and built on our DPI stack

If the last decade was about building Digital India, the next decade must be about unlocking Capital India.

Let’s lay the tracks - before the next train leaves the station