India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the adoption of its central bank-issued digital currency, the e-rupee, 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 following a 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 increase adoption. The push highlights the core challenge faced by CBDCs 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, which pales in comparison to India's Unified Payments Interface, processing around $300 billion monthly. Early adoption efforts have sometimes been artificially inflated. It was reported in 2024 that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, credited employee salaries into CBDC wallets, helping the system briefly surpass 1 million daily transactions in December 2023. As India experiments with its domestic CBDC, 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 BRICS economies at the bloc's 2026 summit, aiming to simplify cross-border trade and reduce dependence 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 to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.