India Promotes Digital Currency Through Welfare Initiatives as BRICS Plan Unfolds

India is leveraging its welfare payment system to boost the adoption of its central bank-issued digital currency, the e-rupee, as the country prepares to showcase its progress at the upcoming BRICS nations summit. Approximately 10 pilot programs have been launched by the Reserve Bank of India, channeling a portion of the country's $80 billion welfare system through the e-rupee. This initiative aims to minimize corruption and leakage in subsidy programs 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 that cover up to 80% of their drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat is working towards onboarding all 7.5 million households eligible for subsidized food by June, utilizing targeted transfers to increase adoption. This push highlights the core challenge faced by central bank digital currencies worldwide: 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, a relatively small figure compared to India's Unified Payments Interface, which processes around $300 billion each month. Early efforts to promote adoption 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 was not sustained. As India experiments with its digital currency domestically, policymakers are also considering its potential role in the global economy. The Reserve Bank of India has urged the government to propose a plan for linking central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the bloc's 2026 summit, with the aim of streamlining cross-border trade and reducing dependence on the US dollar. However, this ambition comes with significant political risks. President Donald Trump has threatened to impose tariffs on BRICS countries that pursue alternatives to the dollar and has already imposed duties on Indian imports, partly due to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.