India Expands Digital Currency Adoption Through Welfare Programs as BRICS Summit Approaches

India is leveraging its welfare payment system to promote the adoption 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 launched approximately 10 pilot programs, channeling a portion of the country's $80 billion welfare system through the e-rupee. This initiative seeks to minimize corruption and leakage in subsidy programs while providing a clearer use case for the CBDC following its slow initial rollout. In one such pilot, farmers in Maharashtra's Phulenagar village 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. The push highlights the core challenge faced by central bank digital currencies worldwide: driving usage. Despite growing to 10 million users from 7 million earlier in the year, the e-rupee has seen cumulative transactions totaling only $3.6 billion since its introduction in December 2022. This is relatively small compared to India's Unified Payments Interface, which processes around $300 billion monthly. 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 CBDC 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 considering its potential role in the global economy. The Reserve Bank of India has urged the government to propose a plan for linking CBDCs across the economies of Brazil, Russia, India, China, and South Africa at the bloc's 2026 summit, aiming to simplify cross-border trade and reduce dependence on the US dollar. However, this ambition carries significant political risk, 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.