India Expands Digital Currency Use Through Welfare Programs as BRICS Summit Approaches

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 the upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot projects that channel a portion of the country's $80 billion welfare funds through the e-rupee, as reported by Reuters. This effort seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after a relatively slow initial rollout. In the Phulenagar village of Maharashtra, farmers are receiving subsidies that cover up to 80% of drip-irrigation costs, which can only be spent at authorized 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 up adoption. This push highlights the primary challenge faced by central bank digital currencies globally: driving usage. The e-rupee has grown to approximately 10 million users from around 7 million earlier in the year, but the total transactions since its introduction in December 2022 amount to only $3.6 billion, which is modest compared to India's Unified Payments Interface that processes around $300 billion each month. The early adoption efforts have sometimes been artificially boosted. 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 achieve 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, aiming to streamline cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risks, as the US 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.