India Drives Adoption of Digital Currency Through Welfare Programs

India is leveraging its welfare payment system to promote the use of its central bank-issued digital currency, the e-rupee, as it prepares to highlight the CBDC at the upcoming BRICS nations summit. The Reserve Bank of India has launched 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 following a slow rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies to cover up to 80% of their drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat aims to bring all 7.5 million eligible households into the subsidized food program by June, using targeted transfers to drive adoption. This push highlights the core challenge faced by central bank digital currencies globally: driving usage. Although the e-rupee has grown to around 10 million users from 7 million earlier this year, 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 each month. Early adoption efforts have sometimes been artificially inflated, such as when major banks credited employee salaries into CBDC wallets to boost daily transactions. As India experiments with its digital currency domestically, policymakers are considering a larger role for the technology on the global stage. The Reserve Bank of India has urged the government to propose a plan for linking central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, with the goal of streamlining cross-border trade and reducing dependence on the US dollar. However, this ambition carries significant political risks, including potential tariffs from the US on BRICS countries pursuing alternatives to the dollar.