Bitcoin as a hedge: Evaluating Bitcoin's role in India's economic strategy
Since Bitcoin's first public release, it has developed unprecedentedly to arguably become the world's best-performing risk asset. Based on its capability for hedging against
inflation
, and the emergence of
DeFi
(Decentralised Finance),
Bitcoin
has witnessed increased adoption across levels, including retail, institutional and government participation. With increased activity by state players like the USA, Bhutan, El Salvador, Russia, Brazil, and many others,
India
is in a unique dilemma regarding Bitcoin: to be or not to be?
If we take a close look at India's economic policies over the last decade and compare them with pre-Bitcoin times, a stark difference can be seen. Pre-2009 India's economic strategies were overtly reactionary to global cues, which have been transformed in the last decade as the country positions itself as one of the most proactive nations regarding economic growth.
The impact of this has been massive, with India becoming the 4th largest
economy
in the world. At the same time, India is increasingly becoming receptive to newer economic models and experiments, something that could be highlighted through the proposed Cryptocurrency and
Regulation
of Official Digital Currency Bill of 2021, and the Supreme Court's recent direction to regulate the sector.
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While many project it as a negative aspect, the intent of regulating an otherwise decentralised sector highlights the government's openness to get involved in it, especially given that India boasts one of the world's fastest Bitcoin-adopting populations.
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This also means that in the long term, Bitcoin is increasingly garnering a favourable sentiment from the policymakers who are setting India's economic strategy for the years ahead. But questions remain — what does Bitcoin offer India's economic strategy that traditional models don't? Let's find out.
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Bitcoin's a hedge against inflation
Global economies are going through uncertain times owing to several internal and external factors. While we will not indulge in making mathematical assumptions, if we take a look at the data of benchmark indices around the world, like the S&P 500 to the Hang Seng, it becomes clear that these indices have not performed as well as their projections. On the other hand, the global commodity market has been largely vulnerable to market dynamics.
These factors have led nations to look at alternative finance or DeFi, in terms of Bitcoin, as the new-age asset has provided multibagger returns in the last few years. BTC has not only outperformed global indices, but also commodities like Gold and Silver — a trend that has piqued the interest of economists around the world.
For instance, the US retail inflation on March 25 was 2.4%, as per the Consumer Price Index, a significant rise from the previous year. Similar cases of inflation have been seen in European countries like the United Kingdom and the EU. In the Indian context, the retail inflation rate has been on a downward curve for the past three years, owing to the country's economic rise in recent years, coming down to 4.6% in 2024-25 from 6.7% in FY 22-23.
If we look at annualised returns over different global indices, Bitcoin has returned over 250%, more than 10 times that of NASDAQ in the second spot. In the Indian context, the Nifty 50 gave a return of approximately 40% since FY 22-23, highlighting how participation and adoption in the Bitcoin space could help India's economic strategy in the long run.
Role in India's economic strategy?
While many nations around the world have made significant strides in Bitcoin already, such as the USA, Bhutan and El Salvador, much of it has been reactionary. In India, DeFi is emerging as a real possibility for government participation, however, much of it weighs on the possibility of establishing a regulatory framework. India has been a vocal advocate of creating a global framework for regulating Bitcoin and other VDAs, and it is being considered as the lynchpin of the country officially joining the race.
However, while officially the Indian government does not endorse Bitcoin, prominent reports have revealed that the country has used Bitcoin for energy trade with one of its European allies. While the efficacy of the report has not been admitted by the Indian government, what it shows is Bitcoin's increasing popularity at the upper echelons of the government. However, the significant tax levied on the capital gains from Bitcoin and other VDAs is largely considered counterproductive in this aspect.
We must understand that India's economic strategy to become a developed nation by 2047, or the goal of Viksit Bharat, is a multilayered strategy. While Bitcoin is not included in the ongoing cohort, its rising popularity and governmental agencies like SEBI and RBI having strong opinions on the asset means it may have a role to play in the future, given that regulations or frameworks are established in a universally accepted means.
This does not mean that India may create a Bitcoin strategic reserve, or use it as legal tender like El Salvador, but in a larger context that benefits the country's bid to become a developed nation. Furthermore, the already existing high adoption rate will supplement this bid and could position India as one of the innovators when it comes to a robust economic strategy.
(The author Roshan Aslam is Cofounder & CEO, GoSats. Views are own)
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