The Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) — with over 800 million beneficiaries — is the largest food security programme in the world. In most parts of the country, the Centre routes food grains to the beneficiary through the Fair Price Shop (FPS) network. But, in 2015-16, Chandigarh, Puducherry and the urban pockets of Dadra & Nagar Haveli chose to discharge the entitlement in cash, credited directly into the beneficiary’s bank account, equivalent in value to the free foodgrain they would have otherwise drawn from FPS.

However, once cash leaves the government’s books through Direct Benefits Transfer (DBT), it carries no trace of what it was actually utilised for, with no way for the government to confirm that it had been used for the intended purpose.

This is the limitation that the Digital Rupee — RBI’s Central Bank Digital Currency (CBDC) — has allowed the government to finally address. CBDC has been deployed to improve upon the DBT architecture. Unlike ordinary DBT, a CBDC token can be programmed to be redeemable only against food grains, with a defined validity window, and only against a wallet that is actively linked to an Aadhaar-verified household. The Digital Rupee leaves a continuous, auditable trail, from the........

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