India Promotes Digital Currency Through Welfare Programs as BRICS Summit Approaches

India is leveraging its welfare payment system to boost the adoption of its digital currency, the e-rupee, as the country prepares for a summit with BRICS nations later this year. The Reserve Bank of India has launched around 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the e-rupee. This initiative aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after a slow rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies that cover up to 80% of their drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat aims to bring all 7.5 million eligible households into the subsidized food program by June, using targeted transfers to increase adoption. The push highlights the challenges faced by central bank digital currencies globally, particularly in terms of 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 only $3.6 billion, a small fraction compared to India's Unified Payments Interface, which processes around $300 billion each month. Early adoption efforts have sometimes been artificially inflated. In 2024, it was reported that several major banks had 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 its potential role in the global economy. The Reserve Bank of India has urged the government to propose a plan for linking 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 reliance on the US dollar. However, this ambition carries significant political risks, particularly given the potential backlash from the US, which has already imposed tariffs on Indian imports and has threatened to do the same for BRICS countries pursuing alternatives to the dollar.