India Promotes Digital Currency Through Welfare Programs as BRICS Plan Takes Shape

India is leveraging its welfare system to increase adoption of its central bank digital currency, with a focus on showcasing its potential at the upcoming BRICS nations summit. The Reserve Bank of India has initiated around 10 pilot programs, channeling 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 CBDC after a slow rollout. 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 households eligible for subsidized food on board by June, effectively using targeted transfers to drive adoption. The push highlights the core challenge of usage that CBDCs face globally. Although the e-rupee has grown to around 10 million users from approximately 7 million earlier this year, cumulative transactions since its introduction in December 2022 total only $3.6 billion, which is small compared to India's Unified Payments Interface, which processes around $300 billion each month. Early adoption efforts have sometimes been engineered, with several major banks crediting 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 domestic digital currency, policymakers are considering a larger geopolitical role for the technology. The Reserve Bank of India has urged the government to advance a proposal for linking CBDCs 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 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.