India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the adoption of its central bank-issued digital currency, the e-rupee, ahead of a key BRICS nations summit later this year. The Reserve Bank of India has initiated around 10 pilot programs, which channel 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 such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidies that cover 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 eligible households into the subsidized food program by June, utilizing targeted transfers to boost 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 each month. Previous 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 central bank digital currencies across the BRICS economies at the 2026 summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risks, particularly in light of President Donald Trump's threats to impose tariffs on BRICS countries that pursue alternatives to the dollar.