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 summit with BRICS nations later this year. 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 seeks to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the digital currency following a sluggish rollout. In one pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies covering up to 80% of drip-irrigation costs, which can only be spent at approved vendors. Another pilot in Gujarat aims to bring all 7.5 million households eligible for subsidized food on board by June, using 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 this year, the e-rupee has only seen $3.6 billion in cumulative transactions since its introduction in December 2022, a fraction of the $300 billion processed monthly by India's Unified Payments Interface. Early adoption efforts have sometimes been artificially inflated, such as when 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 also exploring a broader geopolitical role for the technology. The Reserve Bank of India has urged the government to propose linking central bank digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the 2026 BRICS summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, including potential tariffs from the US on BRICS countries pursuing dollar alternatives.