India Drives Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to boost the adoption of its central bank digital currency, the e-rupee, as it gears up to showcase the CBDC at the 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 sluggish rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies to cover up to 80% of their drip-irrigation costs, which can only be used at approved vendors. Another pilot in Gujarat seeks to bring all 7.5 million households eligible for subsidized food on board by June, effectively utilizing targeted transfers to scale adoption. The push highlights the global challenge of driving usage for central bank digital currencies. Despite growing to 10 million users from 7 million earlier this year, the e-rupee has only seen cumulative transactions totaling $3.6 billion since its introduction in December 2022, a figure that pales in comparison to India's Unified Payments Interface, which processes around $300 billion each month. 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 to help the system reach 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 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 goal of streamlining cross-border trade and reducing dependence on the US dollar. However, this ambition comes with political risks, 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.