India Promotes Digital Currency Through Welfare Programs as BRICS Prepares for Summit

As India gears up to highlight its central bank digital currency at the upcoming BRICS nations summit, it is leveraging welfare payments to drive adoption. The Reserve Bank of India has initiated around 10 pilot projects, channeling a portion of the country's substantial $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 following a sluggish rollout. 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 bring all 7.5 million households eligible for subsidized food on board by June, effectively utilizing targeted transfers to scale adoption. This push highlights a key challenge for CBDCs worldwide: usage. Although the e-rupee has grown to about 10 million users from roughly 7 million earlier this year, cumulative transactions since its introduction in December 2022 total a mere $3.6 billion, which is small compared to India's Unified Payments Interface, processing around $300 billion each month. Early adoption efforts have sometimes been engineered, with several major banks crediting employee salaries into CBDC wallets to help the system surpass 1 million daily transactions in December 2023, a milestone that did not persist. As India experiments domestically, policymakers are considering a larger 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. This ambition carries 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 in part to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.