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 a high-profile summit with BRICS nations later this year. Approximately 10 pilot programs have been initiated by the Reserve Bank of India, channeling 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 digital currency following a slow rollout. In one such pilot in Maharashtra's Phulenagar village, farmers are receiving subsidies that cover up to 80% of drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat seeks to onboard all 7.5 million households eligible for subsidized food by June, using targeted transfers to drive adoption. The push highlights the global challenge of increasing usage of central bank digital currencies. Despite growing to about 10 million users from 7 million earlier this year, the e-rupee has seen cumulative transactions totaling just $3.6 billion since its introduction in December 2022. This is modest compared to India's Unified Payments Interface, which 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 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. The goal is to streamline cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, particularly given the potential for tariffs on BRICS countries pursuing alternatives to the dollar.