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

India is leveraging its welfare payment system to boost the adoption of its central bank-issued digital currency, the e-rupee, as the country prepares for a key summit with BRICS nations later this year. The Reserve Bank of India has initiated around 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the e-rupee. This effort seeks to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the digital currency following its slow initial rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies that cover up to 80% of their 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. 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 7 million earlier this year, cumulative transactions since its introduction in December 2022 total a modest $3.6 billion, a fraction 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, had credited employee salaries into CBDC wallets to help 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 also exploring a larger 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. The goal is to streamline cross-border trade and reduce reliance on the US dollar. However, this ambition carries significant political risk. President Donald Trump has threatened tariffs on BRICS countries pursuing alternatives to the dollar and has already imposed duties on Indian imports tied to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.