India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to boost the adoption of its central bank-issued digital currency, the e-rupee, ahead of a key BRICS nations summit in 2026. 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 digital currency following a slow 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 used at approved vendors. Another pilot in Gujarat seeks to onboard all 7.5 million households eligible for subsidized food 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 e-rupee has only facilitated $3.6 billion in cumulative transactions since its introduction in December 2022, a relatively small amount compared to India's Unified Payments Interface, which processes around $300 billion monthly. Early adoption efforts have sometimes been artificially inflated, such as in 2024 when several major banks 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 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 2026 BRICS summit, aiming to streamline cross-border trade and reduce dependence 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.