India Expands Digital Currency Adoption Through Welfare Initiatives as BRICS Nations Prepare for Summit

India is leveraging its welfare payment system to promote the use of its central bank-issued digital currency, the e-rupee, ahead of a key summit with other BRICS nations later this year. The Reserve Bank of India has launched around 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the e-rupee. This initiative seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after a sluggish rollout. In one pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies covering 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 onto the platform by June, using targeted transfers to drive adoption. The push highlights the global challenge of increasing CBDC usage. Despite growing to 10 million users from 7 million earlier this year, the e-rupee has only facilitated $3.6 billion in cumulative transactions since its introduction in December 2022, a relatively small amount compared to India's Unified Payments Interface, which processes around $300 billion monthly. Previous adoption efforts have sometimes been artificially inflated. 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 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 exploring its potential for a broader geopolitical role. The Reserve Bank of India has urged the government to propose a plan for linking CBDCs across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, including potential tariffs from the US on BRICS countries pursuing alternatives to the dollar.