India Drives Adoption of Digital Currency through Welfare Programs as BRICS Plan Unfolds

As India gears up to showcase its central bank digital currency at the upcoming BRICS nations summit, it is leveraging welfare payments to boost adoption. The Reserve Bank of India has initiated approximately 10 pilot projects, channeling a portion of the country's $80 billion welfare system through the digital currency. This effort aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after a slow rollout. 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 project in Gujarat aims to bring all 7.5 million households eligible for subsidized food on board by June, utilizing targeted transfers to drive adoption. The push highlights the global challenge of driving usage of central bank digital currencies. Despite growing to 10 million users from 7 million earlier in the year, the cumulative transactions since the digital currency's introduction in December 2022 total a modest $3.6 billion, a fraction compared to India's Unified Payments Interface, which processes around $300 billion monthly. Early adoption efforts have sometimes been artificially inflated, such as when major banks credited employee salaries into digital wallets to help the system reach 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments domestically, 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 digital currencies 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, 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.