India Accelerates Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the use of its central bank-issued digital currency, the e-rupee, as the country prepares for the upcoming BRICS nations summit. 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 aims to minimize corruption and leakage in subsidy programs, while also 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 their 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, effectively using targeted transfers to increase adoption. The drive highlights the core challenge faced by central bank digital currencies worldwide: encouraging usage. Although the e-rupee has grown to around 10 million users from 7 million earlier this year, the total transactions since its introduction in December 2022 amount to just $3.6 billion, which is relatively small compared to India's Unified Payments Interface, which processes around $300 billion every month. Early adoption efforts have sometimes been artificially inflated. In 2024, it was reported that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, 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 economies of Brazil, Russia, India, China, and South Africa at the bloc's 2026 summit, with the goal of streamlining cross-border trade and reducing dependence on the US dollar. However, this ambition carries significant political risks, as President Donald Trump has threatened tariffs on BRICS countries that pursue alternatives to the dollar and has already imposed duties on Indian imports tied to its purchases of Russian crude, raising the stakes for any coordinated monetary effort.