India Expands Digital Currency Adoption Through Welfare Programs

As India gears up to showcase its central bank digital currency at the 2026 BRICS summit, it is turning to welfare payments to boost adoption. The Reserve Bank of India has initiated around 10 pilot programs, funneling a portion of the country's $80 billion welfare system through the digital currency. This effort aims to minimize corruption and leakage in subsidy programs while providing a clearer use case for the digital currency after a sluggish rollout. In one such pilot in Maharashtra's Phulenagar village, farmers are receiving subsidies to 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 households eligible for subsidized food on board by June, using targeted transfers to drive adoption. This push highlights the core challenge faced by central bank digital currencies globally: increasing usage. Despite growing to 10 million users from 7 million earlier this year, the total transactions since its introduction in December 2022 amount to just $3.6 billion, a relatively small figure compared to India's Unified Payments Interface, which processes around $300 billion each 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, credited employee salaries into digital currency wallets to help 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 also exploring its potential for a larger geopolitical role. The Reserve Bank of India has urged the government to propose a plan for linking digital currencies across the economies of Brazil, Russia, India, China, and South Africa at the 2026 summit, aiming to streamline cross-border trade and reduce reliance on the US dollar. However, this ambition carries significant political risk, particularly given the threat of tariffs by the US on BRICS countries pursuing alternatives to the dollar.