Digital Rupee or Digital Rift: Assessing the Macroeconomic, Institutional and Financial Inclusion Implications of India's Central Bank Digital Currency

This paper examines the macroeconomic, institutional, and financial inclusion implications of India's Central Bank Digital Currency, the Digital Rupee (e₹), as introduced by the Reserve Bank of India under the RBI Act of 1934. The study analyses the pilot-stage performance of CBDC, evaluating its design architecture and its interaction with existing payment infrastructure, particularly the Unified Payments Interface. Drawing on empirical evidence from global CBDC experiments (China's e-CNY, Bahamas' Sand Dollar, Nigeria's eNaira, and Sweden's e-Krona), the paper identifies five dimensions of policy relevance: (1) financial inclusion versus exclusion dynamics; (2) monetary policy transmission under partial deposit substitution; (3) bank disintermediation risks across public and private sector banks; (4) privacy, programmability, and civil liberty trade-offs; and (5) geopolitical dimensions of cross-border CBDC adoption. The paper argues that a phased, voluntary, and privacy-preserving implementation—anchored in interoperability with UPI, offline capability, and clear user incentives—is necessary for sustainable adoption.