India Expands Digital Currency Adoption Through Welfare Programs as BRICS Nations Plan Common Currency

India is leveraging its welfare payment system to boost the adoption of its central bank-issued digital currency, the e-rupee, ahead of a key summit with BRICS nations later this year. The Reserve Bank of India has launched around 10 pilot programs, which channel a portion of the country's $80 billion welfare system through the e-rupee, as reported by Reuters. This initiative seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after 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, effectively utilizing targeted transfers to scale up adoption. This push highlights the core challenge faced by central bank digital currencies globally: driving usage. Although the e-rupee has grown to around 10 million users from approximately 7 million earlier in the year, cumulative transactions since its introduction in December 2022 total a mere $3.6 billion, which is small compared to India's Unified Payments Interface that processes about $300 billion each month. Early adoption efforts have sometimes been artificially inflated. For instance, in 2024, it was reported that 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 domestically with its digital currency, policymakers are considering a broader geopolitical role for the technology. 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 aim of streamlining cross-border trade and reducing reliance on the US dollar. However, this ambition carries significant political risk, as President Donald Trump has threatened tariffs on BRICS countries pursuing alternatives to the dollar and has already imposed duties on Indian imports tied in part to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.