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- India pilots CBDC via welfare payments to drive usage after weak retail demand.
- Programmable e-rupee restricts spending, ensures traceability, and removes delays.
- Gujarat pilot targets 7.5M households to test CBDC scalability and efficiency.
India’s CBDC strategy is shifting after limited public adoption over the past three years. The Reserve Bank of India is now testing new pilots that route welfare payments through the digital rupee to increase usage across controlled payment systems.
For more than three years, India’s central bank digital currency faced low user demand. The e-rupee, launched in December 2022, struggled to gain traction in retail payments. Early growth figures did not sustain over time.
In late 2023, the digital rupee reached a transaction volume of one million per day. This growth coincided with banks paying some staff members’ salaries in CBDC. In mid-2024, the number of transactions is around 100,000 per day.
India’s UPI remains the preferred payment system. It handles more transactions in a day than the CBDC has handled to date. This shows the digital rupee’s adoption issues.
CBDC Use Grows Through Welfare Schemes
On 23 April, Reuters reported that the RBI is collaborating with the World Bank, the Maharashtra government, and the Punjab National Bank. There are now about ten pilots in operation. The pilots involve some of India’s welfare payment flows using the CBDC.
However, the pilots are primarily in the areas of subsidy payments to farmers and food subsidies. These are areas notorious for problems like delays and skimming. The system is being trialled in locations such as Maharashtra and Gujarat.
In Phulenagar village in Maharashtra, farmers are using programmable digital rupees. Samadhan Sonawane, a farmer, used the system to set up a drip irrigation system. This costs ₹103,000, more than he earns in a season.
Under the pilot, 80% of the expense is rolled directly into a CBDC wallet. These are funds that can be spent at approved vendors. Similar support has been requested by almost 1,400 farmers in the district.
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Moreover, CBDC model eliminates delays in reimbursements. Beneficiaries do not have to pay up front and wait to get refunds. Money is disbursed to be used specifically.
Another important feature is programmable restrictions. The digital rupee does not have the ability to spend outside of approved channels. It is also unable to be converted into cash.
Gujarat CBDC Rollout Focuses on Subsidy Delivery
In Gujarat, a larger pilot is being established. It targets 7.5 million households who can receive subsidized food grains. The implementation will increase in June.
The beneficiaries are given digital coupons as e-rupees. They can be redeemed in fair-price shops. The proprietors of the shops are paid immediately after every transaction.
However, every transaction creates a digital record. This will leave a verifiable trail between payment and settlement. The system facilitates the audits and tracking.
The pilots resolve old problems of the welfare system. These are duplicate beneficiaries, ghost records, and delayed transfers. Moreover, in the CBDC model, the goals of limiting such gaps are achieved in part by distributing them in a controlled manner.
According to Governor of the RBI, Sanjay Malhotra, the e-rupee is not an alternative to cash currently. CBDC wallets have not been connected to other popular apps such as PhonePe or Google Pay. So far, the commercial banks have adhered to instructions yet have not led to wider uptake.
Additionally, the welfare channel offers a regulated mode of entry. The system offers a payment system that beneficiaries must use. This guarantees uniform use in the pilot framework.
Transactions can be completely traced through programmability. However, every transaction is associated with a user, vendor, and time. This feature facilitates checks and balances.
This Gujarat implementation will serve as a test of scale. It will gauge the performance of the system among millions of users. The performance will dictate the further course of growth.
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