India Accelerates Digital Currency Adoption Through Welfare Programs

As India gears up to showcase its central bank digital currency at the upcoming BRICS nations summit, it is leveraging welfare payments to boost adoption. The Reserve Bank of India has initiated around 10 pilot projects, 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 providing a clearer use case for the CBDC after a sluggish rollout. 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, using targeted transfers to drive adoption. The push highlights the global challenge of promoting CBDC usage. Despite growing to 10 million users from 7 million earlier this year, the e-rupee has only seen cumulative transactions of $3.6 billion since its introduction in December 2022, a modest 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, 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 exploring 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, aiming to streamline cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, particularly given President Donald Trump's threats of tariffs on BRICS countries pursuing alternatives to the dollar.