India is preparing to offer welfare assistance through this new technology to spread e-rupe, the central bank digital currency, across the country. The country’s central bank, the Reserve Bank of India, is running about 10 pilot programs to distribute part of social benefits with digital currency. These steps aim to create wider application areas for e-rupe, especially in preparation for the BRICS summit.
Digitalization move in welfare aid
According to official data, India’s welfare system manages a budget of approximately $80 billion annually. In pilot programs, a certain part of these funds is distributed through e-rupe to ensure that the aid reaches those in need directly and transparently, without the use of intermediaries. It is stated that programs that provide up to 80 percent cost support for drip irrigation system installation, especially to farmers in rural areas, have been implemented. These aids can only be used at authorized dealers and are aimed at preventing funds from being spent for purposes other than their intended purpose.
In the state of Gujarat, 7.5 million households that can benefit from subsidized food aid are planned to be included in the e-rupe system by June. Thus, it is aimed to expand the use of digital money in daily life through targeted aid.
Usage rate still low
While the number of e-rupe users was around 7 million at the beginning of 2024, it has recently increased to over 10 million. However, the total transaction volume through e-rupee, which was introduced in December 2022, has reached only $3.6 billion to date. Unified Payments Interface (UPI), India’s digital payment system, has a transaction volume reaching 300 billion dollars per month, and when compared to this rate, the figure in e-rupe is quite limited.
Although it was reported that in the initial period, some large banks deposited employee salaries directly into digital wallets, thus increasing the number of daily transactions to over one million in December 2023, it was observed that this level was not permanent. Although the number of transactions increased in the short term with these applications, the need for additional incentives for natural use in daily life came to the fore.
Although these pilot applications show the possible benefits of digital money, a real transformation for mass adoption has not yet been achieved and users are generally attracted to the system with government-backed incentives.
The search for a global role within BRICS and political risks
India’s central bank plans to increase the role of digital central bank currencies such as e-rupee, not only in the domestic market but also globally. In this context, a proposal to integrate central bank digital currencies in the BRICS countries consisting of Brazil, Russia, China and South Africa is expected to be brought to the BRICS leaders’ summit in 2026. If the plan is implemented, the dependence of international trade on the dollar will decrease.
However, these goals have political repercussions. Former US President Donald Trump had previously stated that he would impose additional trade sanctions if the BRICS countries turned to non-dollar alternatives. On the other hand, the Trump administration had already imposed new import taxes on India’s oil imports from Russia. All these developments reveal that the steps taken by India, along with the aim of gaining a regional financial power, may also affect global economic balances.
