How a central bank digital currency helps governments in India meet their welfare promises

New Delhi, Sept. 28 -- India has a habit of turning payments into public infrastructure. The Unified Payments Interface (UPI) put a bank in every pocket. Now the Reserve Bank of India (RBI) is teaching money itself to follow instructions.More than four years after the RBI Act was amended in March 2022, the digital rupee has some 8 million retail users, 120 million transactions worth over Rs.28,000 crore and 19 banks participating in its pilot runs.While the world debates whether central banks should issue digital cash, India is testing what makes it worth issuing: programmability.The exploration map is already colourful. Gujarat supports self-help group women, and like Puducherry and Chandigarh, it credits the PM-Garib Kalyan Anna Yojana (PM-GKAY) food subsidy in e-rupees, redeemable only at fair price shops, as part of a trial run.Maharashtra's Project On Climate Resilience Agriculture uses the digital currency to disburse drip-irrigation funds to farmers. The scope is vast.Andhra Pradesh provides a free LPG cylinder subsidy and Tamil Nadu offers skill vouchers, Telangana supports women journalists and Haryana provides e-scooters for construction workers.Madhya Pradesh is shifting from paper welfare coupons to the e-rupee, while Karnataka is using it as a payment leg in peer-to-peer energy trading. PM-Vidyalaxmi is moving to a digital rupee platform.Candour first, since one number is humbling. Digital rupees in circulation fell 24% to Rs.771.7 crore in 2025-26. As a substitute for cash, the e-rupee has yet to find its moment. As a tool of the state, it has. A subsidy is not cash a citizen can choose to hold, but a promise the exchequer wants honoured. Programmable money is an encoded version of that promise.Nowhere is that clearer than in Uttarakhand, which RBI has called the pioneer among states in using programmability. Its farms are small: about 900,000 holdings, three-fourths of them marginal, with a typical plot size of 0.80 hectare.A subsidy that arrives late or strays can cost a season's harvest; last October, pending Mission Apple aid and ultra-high-density orchard assistance had to be released on priority.A November 2024 order now requires agriculture and allied departments to pay digitally when farmers apply for the state's Kiwi Neeti, Mission Apple, Millet Mission and Aroma Neeti. Live pilots, run with Union Bank of India and Punjab National Bank and linked via API to an Apuni Sarkar portal, cover Uttarakhand's NABARD-funded cluster polyhouse scheme.Take the unit: one polyhouse. The scheme plans 14,777 units on over 1.2 million square metres for Rs.304.4 crore, or about Rs.2.0 lakh per 100 sq. m. The subsidy is 80%, about Rs.1.60 lakh; the farmer contributes Rs.40,000. Subsidy funds move in three tranches of about Rs.70,000, Rs.70,000 and Rs.60,000. Each tranche lands in the farmer's locked digital wallet, goes via a QR code to a registered vendor and is unlocked only after a horticulture mobile team files a joint inspection report with geo-tagged photographs and the district horticulture officer approves.Traditional direct benefit transfer (DBT) audits follow subsidy disbursement. Here, a subsidy cannot be disbursed until the work is verified. No bank account is needed, only a digital wallet on the smartphone.Now, let us look at the funnel. The team processed 2,694 applications, covering 228,900 sq. m for 2,578 beneficiaries. The team released Rs.3.21 crore across the first and second voucher tranches. The department fully constructed 323 polyhouses, covering 23,100 sq. m of high-tech greenhouse area.Dehradun leads the state with 72 polyhouses installed ( Rs.68.4 lakh in vouchers), followed by Chamoli (46 units, Rs.27.2 lakh), Almora (41 units, Rs.38.9 lakh), Pauri (36 units, Rs.20.6 lakh) and Rudraprayag (29 units, Rs.67.2 lakh). This means just 12% of applications have become finished units and the Rs.3.2 crore released is barely 1% of the scheme's Rs.304.4 crore outlay. Dehradun alone accounts for 22% of completed units.The arithmetic should worry us. Three tranches across 14,777 units mean 44,331 rounds of field verification and approval. Every delay leaves a vendor's working capital idle, so vendors price that into polyhouses. Accountability must not become a queue.So what should be done? First, fix the front of the funnel: set up wallet-opening camps via common service centres and gram panchayats, and publish district conversion rates weekly.Second, build verification capacity: use geo-tagged imagery and satellite checks for routine cases, field teams for sampled and high-risk sites, and a fixed seven-day turnaround with automatic escalation. Third, widen the hill vendor base and use the offline mode that RBI is piloting.Fourth, replicate the locked-tranche template across apple, kiwi, millet and trout schemes, and route the Centre's share of centrally sponsored schemes through the Public Financial Management System, as Chandigarh and Puducherry do for PM-GKAY.Fifth, move to credit: RBI is piloting programmable loans for tenant farmers, opening the formal system to cultivators without title or collateral. Finally, publish a scoreboard and commission an independent evaluation.India is learning to deploy digital money to keep its promises more effectively. Uttarakhand is where the lesson meets the terrace farm. Can the state give the digital rupee pace and purpose? The next season will tell.These are the authors' personal views.The author are, respectively, agriculture secretary, and economic adviser, chief minister's office, government of Uttarakhand. Published by HT Digital Content Services with permission from MINT. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]