India Promotes Digital Rupee Through Welfare Programs as BRICS Currency Plan Unfolds

India is leveraging welfare payments to boost the adoption of its central bank-issued digital currency, the e-rupee, as the country prepares to highlight its CBDC at an upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot programs, redirecting a portion of the country's $80 billion welfare system through the digital currency. This effort seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the CBDC following a slow initial 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 households eligible for subsidized food on board by June, effectively using targeted transfers to drive 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 just $3.6 billion, a relatively small figure compared to India's Unified Payments Interface, which processes around $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 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 more significant 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 reliance on the U.S. dollar. However, this ambition carries political risks, 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.