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

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. The Reserve Bank of India has initiated around 10 pilot programs, which involve channeling a portion of the country's $80 billion welfare system through the e-rupee. This effort aims to minimize corruption and leakage in subsidy programs, while also providing a clearer use case for the digital currency following a slow rollout. In one such pilot in Maharashtra's Phulenagar village, farmers 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 aims to bring all 7.5 million households eligible for subsidized food on board by June, using targeted transfers to drive adoption. This push highlights the core challenge faced by central bank digital currencies globally: increasing usage. The e-rupee has grown to around 10 million users from approximately 7 million earlier this year, but 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. In 2024, it was reported that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, had credited employee salaries into CBDC wallets to help the system reach 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 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, with the goal of streamlining cross-border trade and reducing reliance on the US dollar. However, this ambition carries significant political risks. President Donald Trump has threatened tariffs on BRICS countries that pursue 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.