India Accelerates Digital Currency Adoption 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 the country prepares for the upcoming BRICS nations summit. The Reserve Bank of India has launched around 10 pilot programs, directing a portion of the country's $80 billion welfare system through the e-rupee. This initiative aims to minimize corruption and reduce inefficiencies in subsidy distribution while providing a clearer use case for the digital currency following its slow initial rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies for up to 80% of their drip-irrigation costs, which can only be used at approved vendors. Another pilot in Gujarat seeks to bring all 7.5 million households eligible for subsidized food on board by June, effectively utilizing targeted transfers to drive adoption. The push highlights the global challenge faced by central bank digital currencies: driving usage. Although the e-rupee has grown to about 10 million users from 7 million earlier this year, the total transactions since its introduction in December 2022 amount to only $3.6 billion, which is relatively small compared to India's Unified Payments Interface that processes around $300 billion each month. Early adoption efforts have sometimes been artificially inflated. It was reported in 2024 that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, 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 its digital currency domestically, policymakers are considering a broader geopolitical role for the technology. The Reserve Bank of India has urged the government to move forward with a proposal to link central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the bloc's 2026 summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, 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.