India Accelerates Digital Currency Adoption Through Welfare Program Trials

India is leveraging its welfare payment system to boost the adoption of its digital currency, the e-rupee, as the country gears up to showcase its central bank digital currency at the upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot programs that channel a portion of the country's $80 billion welfare system through the e-rupee, according to Reuters. This effort seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency following a relatively slow 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, using targeted transfers to drive adoption. The push highlights the global challenge of usage for central bank digital currencies. Although the e-rupee has grown to about 10 million users from 7 million earlier this year, cumulative transactions since its introduction in December 2022 total only $3.6 billion, which is modest compared to India's Unified Payments Interface that processes around $300 billion each month. Early adoption efforts have sometimes been artificially inflated. For instance, in 2024, several major banks, including HDFC, Kotak Mahindra, and Axis Bank, credited employee salaries into CBDC wallets, helping the system surpass 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 BRICS summit in 2026, aiming to facilitate cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risks, particularly given President Donald Trump's threats of tariffs on BRICS countries pursuing alternatives to the dollar.