India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the use of its central bank-issued digital currency, as the country prepares to highlight the CBDC at an upcoming BRICS nations summit. 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 aims to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the CBDC after a sluggish rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies to 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 core challenge of usage faced by CBDCs globally. 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 only $3.6 billion, a relatively small amount 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, helping the system surpass 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments with its domestic 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 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 reliance 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.