Digital Rupee Pilot for Food Subsidy Under PMGKAY

The Union government will launch a Central Bank Digital Currency (CBDC)-based pilot for delivering food subsidies under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) in Puducherry from 26 February. This marks a shift toward digital, traceable, and purpose-bound subsidy delivery.

What is the Initiative?

• Subsidies will be delivered using the digital rupee (CBDC) issued by the Reserve Bank of India.
• The pilot aims to make subsidy delivery:
  • Better targeted
  • Fully traceable
  • Purpose-bound (usable only for food purchases)

Objectives of the Pilot

• Reduce leakages in the Public Distribution System (PDS).
• Improve transparency and accountability.
• Ensure benefits are used only for intended purposes.
• Test operational readiness before scaling nationwide.

What is CBDC?

• A Central Bank Digital Currency (CBDC) is the digital form of a country’s sovereign currency, issued and regulated by its central bank.
• In India, the CBDC is the digital rupee, issued by the Reserve Bank of India (RBI).
• It is a legal tender, just like physical cash, but exists in electronic form.

About PMGKAY

• Provides free or subsidised foodgrains under the National Food Security Act.
• Covers over 800 million beneficiaries, making it one of the world’s largest food security programmes.
• Currently operates through:
  • Public Distribution System (PDS)
  • Direct Benefit Transfer (in select cases)