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, ahead of a key BRICS nations summit later this year. The Reserve Bank of India has initiated around 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the e-rupee. This effort seeks to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the CBDC after a relatively slow rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies that cover up to 80% of drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat aims to bring all 7.5 million households eligible for subsidized food on board by June, using targeted transfers to drive adoption. This push highlights the global challenge of increasing CBDC usage. The e-rupee has grown to around 10 million users from 7 million earlier this year, but total transactions since its introduction in December 2022 amount to just $3.6 billion, a small fraction compared to India's Unified Payments Interface, which processes around $300 billion per month. Early adoption efforts have sometimes been artificially inflated. In 2024, it was reported that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, had credited employee salaries into CBDC wallets to help the system reach 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments with CBDCs domestically, policymakers are exploring a broader geopolitical role for the technology. The Reserve Bank of India has urged the government to propose a plan for linking CBDCs across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risks, as President Donald Trump has threatened tariffs on BRICS countries pursuing alternatives to the dollar and has already imposed duties on Indian imports tied to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.