India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the use of its central bank digital currency, the e-rupee, as the country prepares to highlight the CBDC at an upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot programs, which channel a portion of the country's $80 billion welfare system through the e-rupee. This effort aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the CBDC after a slow rollout. In one pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies to cover up to 80% of drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat aims to onboard 7.5 million households eligible for subsidized food by June, using targeted transfers to increase adoption. The e-rupee has grown to around 10 million users, but cumulative transactions since its introduction in December 2022 total only $3.6 billion, a relatively small amount compared to India's Unified Payments Interface, which processes around $300 billion per month. Early adoption efforts have sometimes been artificially boosted, such as when several major banks credited employee salaries into CBDC wallets to help the system reach 1 million daily transactions in December 2023. India's domestic experimentation with the e-rupee comes as policymakers consider a larger role for the technology in international trade. The Reserve Bank of India has urged the government to advance a proposal for linking CBDCs across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, aiming to streamline cross-border trade and reduce reliance on the US dollar. However, this ambition carries significant political risk, including potential tariffs from the US on BRICS countries pursuing alternatives to the dollar.