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, as the country prepares to highlight its CBDC 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 e-rupee. This effort aims to minimize corruption and leakage in subsidy programs, while providing a clearer use case for the CBDC following a slow rollout. In one such pilot, farmers in Maharashtra's Phulenagar village are receiving subsidized payments for drip irrigation, which can only be used 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 CBDC usage. Despite growing to 10 million users, the e-rupee has only facilitated $3.6 billion in cumulative transactions since its introduction in December 2022. This is a fraction of the $300 billion processed monthly by India's Unified Payments Interface. Early adoption efforts have sometimes been artificially inflated, with some major banks crediting employee salaries into CBDC wallets to boost transaction numbers. As India experiments with its domestic CBDC, policymakers are exploring a broader geopolitical role for the technology. The Reserve Bank of India has urged the government to propose a plan for linking CBDCs 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, including potential tariffs from the US on BRICS countries pursuing dollar alternatives.