India at the Crossroads of Web3: Regulation, Innovation, and Global Opportunity

By Sumit Gupta

India now has a $ 4 trillion economy, according to International Monetary Fund (IMF) data and stands as the fourth-largest economy in the World. Viksit Bharat@2047 (Developed Nation@2047) launched by our Hon'ble Prime Minister Shri Narendra Modi aims to make India a developed nation by 2047, the year that marks the 100th anniversary of India's independence.

Several factors contribute to this growth trajectory, such as the role of the digital economy, technology, and IT industries. To exemplify, according to The State of India's Digital Economy Report 2024, India currently ranks as the World's third most digitalised economy. This stupendous growth is projected to double in size and contribute to nearly one-fifth of the national income by 2029-30.

As a Global tech-powerhouse, India's IT and IT–enabled services contribute a whopping $250 billion in value, with exports reaching $200 billion. In its efforts to bolster the momentum of tech driven industries in the economy, the government continues to strengthen its commitment towards advancing emergent technologies like AI, quantum computing, and semiconductors on the back of progressive policies.

Where does Web3 stand in the midst of tech and digital revolution?

Akin to India's digital and technology transformation, the Web3 evolution is equally stimulating. The India Web3 Landscape Report 2024 is a resounding affirmation of this fact. It deftly acknowledges the exponential proliferation of Web3 adoption since 2024, which is only set to increase in the future. With over a thousand web3 startups, India's share of global Web3 developers has risen from 5 per cent to 12 per cent in the past 10 years, having established itself as the second-largest blockchain developer hub in the World. It is quite intriguing to note that, in 2024 alone, India aced the list with 17 per cent of global developers that entered into the Web3 arena.

Moving beyond the numbers, the passion for decentralised technology in India is evident and can be traced in every forum, whether in metro cities or in tier 2 and tier 3 towns.

Although the builder ecosystem has mustered substantial momentum, the investor-side of India's digital asset vista remained a dynamic force until taxation policies cut it short while disrupting the industry's tech evolution. This has effectuated a considerable drop in investor participation by stifling a once-promising story into a heavily-curtailed space.

The 1 per cent TDS that broke the market

From 2021 onwards, India has registered a significant spike in crypto adoption. This has largely been achieved by demonstrating its enormous growth potential among leading global markets. Come 2022, the Indian government instituted a novel tax framework for virtual digital assets. This primarily included a 30 per cent capital gains tax, a strict curb on offsetting losses, and a 1 per cent tax deducted at source (TDS) on every transaction. Aiming to infuse greater transparency and keep bad actors in check, the result has been far from satisfactory. The restrictions have led to a steep decline in domestic crypto activity while prompting an investor exodus to offshore exchanges in their bid to circumvent the stringent tax imposition.

Toward a Comprehensive Regulatory Framework

Cut to August 2025, the Parliamentary Standing Committee on Finance released a detailed study titled "A Study on Virtual Digital Assets (VDAs) and the Way Forward." The initiative endeavoured to carve out a functional and practical regulatory framework by balancing innovation with user protection. These amendments will certainly prove instrumental in guiding India's Web3 policy as the nation looks to cement its rising status in the global tech order.

For the framework to be truly effective, the Standing Committee should actively consult the industry, drawing on the experience of domestic exchanges, developers, and global best practices to design rules that are both practical and future-ready.

India has shown time and again that with the right combination of talent, infrastructure, and supportive policies, it can build technology sectors that can truly compete on the global stage. The IT-ITeS sector is a prime example. What if India had not supported the IT-ITeS space? Would it have been possible for it to come this far from a $20 million industry in 1992–93 to $250 billion today? And the 5.4 million jobs the industry has created, would that have been possible? Similar is the story of GenAI innovation, which is getting the right support under the Government's IndiaAI Mission. The industry is estimated to contribute up to $1.5 trillion to the nation's GDP by 2030.

Looking ahead, the Web3 industry holds similar promise. The Indian Web3 entrepreneurs are passionately building, aligning with the Prime Minister's vision, Make in India, Make for the World. They are confident that with better taxation rules and a supportive regulatory framework, India can be a global Web3 hub and could contribute $1 trillion to India's economy and create over 800,000 jobs by 2030.

What is required is a clear regulatory path!

(The author is Co-founder, CoinDCX)

(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)