India Boosts Digital Currency Adoption Through Welfare Programs

As India prepares to showcase its central bank digital currency at the upcoming BRICS summit, the government is leveraging welfare payments to drive adoption. The Reserve Bank of India has launched approximately 10 pilot programs, which channel a portion of the country's $80 billion welfare system through the digital currency. This initiative aims to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the digital currency following a slow rollout. In certain villages, farmers are receiving subsidies that cover up to 80% of drip-irrigation costs, which can only be redeemed at approved vendors. Another pilot program in Gujarat seeks to onboard 7.5 million households eligible for subsidized food by June, utilizing targeted transfers to scale adoption. The digital currency has gained around 10 million users, with cumulative transactions totaling $3.6 billion since its introduction in December 2022. However, this remains a fraction of the $300 billion processed monthly by India's Unified Payments Interface. To address the challenge of usage, policymakers are exploring a broader role for the technology, including a proposal to link digital currencies across BRICS economies to facilitate cross-border trade and reduce dependence on the US dollar.