India Expands Digital Currency Adoption Through Welfare Programs Ahead of BRICS Summit

As India prepares to showcase its central bank digital currency at the upcoming BRICS nations summit, the government is leveraging welfare payments to drive adoption. Approximately 10 pilot programs are currently underway, channeling a portion of the country's $80 billion welfare system through the digital currency. This effort aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency following its slow rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies to cover up to 80% of their drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat seeks to bring all 7.5 million households eligible for subsidized food on board by June, effectively using targeted transfers to boost adoption. The push highlights a key challenge facing central bank digital currencies globally: encouraging usage. Despite growing to 10 million users from 7 million earlier this year, the digital currency has only facilitated $3.6 billion in cumulative transactions since its introduction in December 2022. This is relatively small compared to India's Unified Payments Interface, which processes around $300 billion each month. Previous 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 digital currency 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 role in the global economy. The Reserve Bank of India has urged the government to propose a plan for linking central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, with the goal of streamlining cross-border trade and reducing reliance on the US dollar. However, this ambition comes with significant political risks, including the potential for tariffs on BRICS countries pursuing alternatives to the dollar.