In the village of Phulenagar in Maharashtra’s Nashik district, a small onion farmer named Samadhan Sonawane recently installed a drip irrigation system on his land. The system costs 1,03,000 rupees — more than twice what he earns in a full five-month growing season. Under normal circumstances, India’s agricultural subsidy system would reimburse him for 80% of the cost, but only after he had paid the full amount upfront, submitted paperwork, and waited weeks or months for the government’s bureaucratic machinery to process his claim. Many farmers never complete the cycle. Many subsidies never reach their intended recipients.
Sonawane did it differently. He received the funds before the purchase, directly into a digital wallet holding e-rupees — India’s central bank digital currency — issued by the Reserve Bank of India. Those e-rupees could be spent only at approved vendors. There was no cash to be diverted. There was no intermediary to skim a margin. There was no paperwork queue. Nearly 1,400 farmers in the district have applied to participate in the same programme.
This is what programmable money looks like when it works. It is also, according to a Reuters report published Thursday, the mechanism through which India’s government and central bank are attempting to solve two problems simultaneously: the chronic inefficiency of an $80 billion welfare system that has historically haemorrhaged funds to corruption and ghost beneficiaries, and the stubbornly slow adoption of an e-rupee that, three and a half years after its December 2022 launch, has barely moved the needle on daily usage.
The Adoption Problem No One Wants to Admit
The e-rupee’s adoption record is, to put it plainly, poor. Cumulative transactions since its launch total approximately $3.6 billion — a figure that India’s Unified Payments Interface processes in a matter of hours. UPI handled more than 22.6 billion transactions in March 2026 alone, processing around $300 billion monthly. The e-rupee has approximately 10 million users, up from 7 million earlier in the year — growth that sounds significant until it is placed against UPI’s more than 400 million active users.
The comparison is not entirely fair. UPI is a payment rail — an infrastructure layer that connects bank accounts and allows instant transfers. The e-rupee is a digital representation of currency itself, issued directly by the central bank, sitting in a wallet outside the commercial banking system. They are different instruments serving different functions. But for a general population that already has access to fast, free, and extraordinarily convenient digital payments through UPI, PhonePe, and Google Pay, the e-rupee has struggled to offer a compelling reason to switch.
The previous attempt to manufacture adoption was, by any honest assessment, a failure. In late 2023, several major banks — including HDFC, Kotak Mahindra, and Axis Bank — began crediting portions of employee salaries into CBDC wallets to help the system surpass 1 million daily transactions. The milestone was achieved. It did not persist. By mid-2024, daily retail transactions had crashed to roughly 100,000. The underlying demand was never there.
The welfare route is a fundamentally different approach. As the Crypto Times analysis noted with unusual directness: “Welfare delivery is not just a use case for the CBDC, it is the only channel where the RBI can guarantee adoption, because the beneficiary has no alternative.” That is an accurate description of the strategy, and it raises questions that the RBI and the government would prefer to discuss in the language of efficiency and anti-corruption rather than compulsion.
The Ten Pilots and What They Are Testing
The Reserve Bank of India is now running approximately 10 pilot programmes routing portions of India’s welfare system through the e-rupee, run in collaboration with the World Bank, the Maharashtra state government, and Punjab National Bank. The programmes are concentrated in two states: Maharashtra, home to the agricultural subsidy pilot in Nashik district, and Gujarat, where a considerably larger programme is underway.
The Gujarat pilot, launched by Union Home Minister Amit Shah in February 2026, targets all 7.5 million households eligible for subsidised food grains under the state’s public distribution system. The ambition is to onboard all 7.5 million households by June — a timeline that, if achieved, would represent the largest single deployment of CBDC for welfare delivery anywhere in the world outside China, and the first genuine stress test of India’s e-rupee infrastructure at meaningful scale.
The two pilots together illustrate the RBI’s two-track architecture for CBDC deployment. The Maharashtra agricultural subsidy model is asset-linked: the programmable e-rupees are tied to a specific capital purchase — an irrigation system — from a specific approved vendor category. The Gujarat food distribution model is consumption-linked: recurring food subsidy entitlements delivered directly to digital wallets, replacing the existing system of physical ration cards and Public Distribution System outlets where diversion and ghost beneficiary registration have historically been most prevalent.
Both programmes feature the structural characteristic that makes programmable money genuinely powerful from a welfare delivery perspective and genuinely concerning from a civil liberties one: every transaction is fully traceable and conditional. Every e-rupee subsidy payment links a named beneficiary to a specific purchase, vendor, location, and timestamp. For governments seeking to eliminate welfare fraud, this is an enforcement tool of unprecedented precision. For critics of CBDC deployment, it is a real-time map of citizen spending behaviour, collected by the state, under conditions where the citizen has no meaningful ability to opt out.
The Privacy Tension Built Into the Design
The RBI has acknowledged, through a first source cited by Reuters, that it intends to maintain different CBDC versions for different use cases: welfare payment CBDCs will carry higher transparency — meaning full traceability — while retail CBDCs will carry greater privacy protections. The distinction is significant. It means that the most financially vulnerable Indians — the subsidy recipients who are the target population of these pilots — will use the most surveilled version of the digital currency, while more affluent retail users can eventually access a version with stronger privacy protections.
This is not an incidental design choice. It reflects the fundamental tension at the heart of programmable money as a welfare instrument. The features that make it effective at preventing diversion — conditionality, traceability, vendor restriction — are precisely the features that critics argue constitute a disproportionate constraint on the autonomy of people who are, by definition, already economically vulnerable. Several jurisdictions that have deployed CBDCs have faced similar criticisms. India’s scale amplifies them.
RBI Governor Sanjay Malhotra has publicly acknowledged the current limitations, stating that the e-rupee is “not a substitute for cash for now.” That candour is appropriate, but it does not resolve the design tension. A welfare delivery CBDC that beneficiaries cannot opt out of and that records every transaction at the central bank level is not merely a more efficient payment mechanism. It is a different relationship between the state and the citizen, mediated through money.
The BRICS Dimension and the Dollar Risk
The domestic welfare deployment is not the only ambition driving the e-rupee programme. The RBI has urged the Indian government to advance a proposal at the 2026 BRICS summit to link CBDCs across Brazil, Russia, India, China, and South Africa, enabling cross-border trade settlement outside the US dollar system.
The geopolitical logic is straightforward. A significant portion of India’s current account deficit is paid in dollars. Its purchases of Russian crude oil — at discounted prices that have provided India real economic benefit — have attracted US tariff scrutiny precisely because they bypass the dollar-denominated global energy market. A BRICS CBDC bridge that enables bilateral settlement in national digital currencies would reduce that dependence and, with it, the vulnerability to dollar-denominated sanctions and tariff threats.
The risk is equally clear. President Trump has explicitly threatened tariffs on BRICS countries pursuing dollar alternatives. India has already absorbed duties linked to its Russian oil purchases. Advancing a formal BRICS CBDC interoperability proposal at the 2026 summit would place India squarely in the category of countries actively building dollar-alternative infrastructure — a political provocation with real economic consequences at a moment when India’s export access to the US market remains a strategic priority.
That tension — between India’s dollar-alternative geopolitical ambitions and its dependence on US market access — will define the limits of how far the BRICS CBDC proposal can actually advance, regardless of what the domestic welfare pilots demonstrate.
For now, the more immediate test arrives in June: whether India can put 7.5 million Gujarat households onto an e-rupee food subsidy system and keep it running reliably. If it works at that scale, the case for national expansion becomes difficult to argue against. The case for the privacy protections that national expansion should include becomes equally difficult to ignore.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on Reuters and publicly available information.