India Expands Digital Currency Adoption Through Welfare Programs

India is leveraging its welfare payment system to promote the adoption of its central bank-issued digital currency, as the country prepares to showcase its progress at 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 digital currency, according to a Reuters report. This effort aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency following its slow initial rollout. In one such pilot in Maharashtra's Phulenagar village, farmers 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, effectively utilizing targeted transfers to drive adoption. The push highlights the core challenge of usage faced by central bank digital currencies globally. Despite growing to around 10 million users from 7 million earlier in the year, the cumulative transactions since its introduction in December 2022 amount to merely $3.6 billion, a small fraction compared to India's Unified Payments Interface, which processes approximately $300 billion each month. Early adoption efforts have sometimes been artificially inflated. It was reported in 2024 that several major banks, including HDFC, Kotak Mahindra, and Axis Bank, credited employee salaries into digital currency wallets, helping the system surpass 1 million daily transactions in December 2023, a milestone that was not sustained. As India experiments with its digital currency domestically, policymakers are considering a broader geopolitical role for the technology. The Reserve Bank of India has urged the government to advance a proposal for linking 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 reliance on the US dollar. However, this ambition carries significant political risks, as President Donald Trump has threatened tariffs on BRICS countries pursuing 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.