India Expands Digital Currency Adoption Through Welfare Programs Ahead of BRICS Summit

As India gears up to showcase its central bank digital currency at the upcoming BRICS nations summit, it is harnessing welfare payments to drive adoption. The Reserve Bank of India has initiated around 10 pilot programs, channeling a portion of the country's substantial $80 billion welfare system through the e-rupee. This effort aims to minimize leakage and corruption in subsidy programs while providing a clearer use case for the CBDC after a relatively 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 aims to onboard all 7.5 million households eligible for subsidized food by June, effectively utilizing targeted transfers to scale adoption. The push highlights the core challenge of usage that CBDCs face globally. Despite growing to about 10 million users from approximately 7 million earlier this year, the cumulative transactions since the e-rupee's introduction in December 2022 total a modest $3.6 billion, which is small compared to India's Unified Payments Interface that processes about $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 surpass 1 million daily transactions in December 2023, a milestone that did not last. As India experiments 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 CBDCs 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 U.S. dollar. However, this ambition carries political risks, including potential tariffs on BRICS countries pursuing alternatives to the dollar, which raises the stakes for any coordinated monetary effort.