India Drives Digital Currency Adoption Through Welfare Programs as BRICS Summit Approaches

India is leveraging its welfare payment system to promote the use of its central bank digital currency, as the country prepares to showcase its CBDC at an upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the digital currency, according to a Reuters report. This effort seeks 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 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 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. In 2024, it was reported that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, credited employee salaries into CBDC wallets to help the system surpass 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments with its domestic digital currency, policymakers are also exploring a larger geopolitical role for the technology. The Reserve Bank of India has urged the government to advance a proposal for linking central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the bloc's 2026 summit, aiming to streamline cross-border trade and reduce reliance 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.