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

India is leveraging its welfare payment system to promote the use of its central bank digital currency, the e-rupee, as the country prepares for a BRICS nations summit later this year. The Reserve Bank of India has initiated approximately 10 pilot programs that channel a portion of the country's $80 billion welfare system through the e-rupee. This effort aims to minimize corruption and reduce leakage in subsidy programs, while also providing a clearer use case for the CBDC 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 aims to bring all 7.5 million eligible households into the subsidized food program by June, effectively utilizing targeted transfers to drive adoption. This push highlights the core challenge facing CBDCs globally: driving usage. Although the e-rupee has grown to about 10 million users from 7 million earlier this year, cumulative transactions since its introduction in December 2022 total only $3.6 billion, a small figure compared to India's Unified Payments Interface, which processes around $300 billion each month. Early adoption efforts have sometimes been artificially inflated. For instance, in 2024, several major banks, including HDFC, Kotak Mahindra, and Axis Bank, credited employee salaries into CBDC wallets, helping the system reach 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments with its domestic CBDC, 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. This move aims to streamline cross-border trade and reduce reliance on the US dollar. However, this ambition carries significant 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 to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.