India’s digital currency rollout exposes systemic gaps in welfare delivery amid privatisation pressures and data colonialism risks

India’s welfare system historically relied on decentralised, caste-based networks of mutual aid (*jajmani* system) and community granaries (*anna-daan*), which were dismantled by colonial land revenue policies and later by neoliberal reforms. Digital currency systems, which require biometric enrolment and smartphone access, systematically exclude Adivasi and Dalit communities, whose oral traditions and land-based economies resist such quantification. The push for digital welfare mirrors colonial-era attempts to 'rationalise' indigenous economies through cash transfers, ignoring that many marginalised groups prefer in-kind support (e.g., food grains) over volatile digital credits.

India’s current digital welfare push echoes the 1991 IMF structural adjustment programme, which forced the dismantling of the Public Distribution System (PDS) under the guise of reducing 'leakage,' only to later reintroduce it as a 'leaky' system requiring digital fixes. The 2016 demonetisation disaster exposed the fragility of cash-based welfare, yet policymakers now treat digital currency as a panacea without addressing the root causes of exclusion—such as caste-based discrimination in banking access. Historical precedents in other Global South nations (e.g., Nigeria’s failed cash transfer programmes) show how digital solutions often serve as Trojan horses for financialisation, not welfare improvement.

In Brazil, the *Bolsa Família* programme initially reduced poverty but later faced backlash for its exclusion of quilombo communities (Afro-Brazilian descendants of escaped slaves) due to bureaucratic digital barriers, mirroring India’s caste-based exclusions. South Africa’s *Social Relief of Distress* grants, though more inclusive, have been undermined by private fintech intermediaries siphoning fees, a risk India’s UPI-based system also faces. In Kerala, India’s public health system’s success during COVID-19 stemmed from community health workers (*anganwadi* system), a model that contrasts with the top-down, data-driven approaches now being imposed on welfare delivery.

Studies show that digital welfare systems can reduce leakage but often increase exclusion errors (e.g., Aadhaar-based biometric authentication failures disproportionately affect marginalised groups) and create new forms of surveillance capitalism. Research from the *Journal of Development Economics* (2022) found that cash transfers in India reduced poverty by 10% but digital exclusions negated gains for 15% of the poorest households. The scientific literature on 'financial inclusion' (e.g., World Bank’s *Global Findex*) conflates access with equity, ignoring how digital infrastructure entrenches power asymmetries in data ownership and algorithmic bias.

Artistic traditions in India, such as the *Bhagavad Gita*’s emphasis on *dana* (selfless giving) and *anna-daan* (food sharing), frame welfare as a sacred duty, contrasting with the transactional, data-driven models now being imposed. The *Jatakas* (Buddhist tales) critique hoarding and exploitation, themes echoed in modern folk songs from marginalised communities protesting digital exclusion. Spiritual leaders like Dalit activist *Kancha Ilaiah* have framed caste-based exclusion in welfare as a violation of *dharma*, yet such perspectives are sidelined in mainstream policy discourse.

If unchecked, India’s digital currency push could lead to a two-tier welfare system: one for the 'data-rich' (urban, upper-caste, digitally literate) and another for the 'data-poor' (rural, marginalised, offline), exacerbating inequality. Scenario modelling by the *Centre for Policy Research* suggests that fintech intermediaries could capture up to 30% of welfare funds as transaction fees, while algorithmic biases in credit scoring may lock the poor into debt cycles. Alternative futures—such as community-led digital cooperatives or open-source welfare platforms—could democratise data governance but require regulatory shifts away from privatisation.

Dalit and Adivasi activists warn that digital welfare systems reproduce caste-based exclusion by design, as biometric enrolment fails for those with manual labour-damaged fingerprints or no official IDs. Women’s groups highlight how digital currency systems, tied to Aadhaar-linked bank accounts, increase domestic violence risks when male relatives control access. Migrant workers and informal sector labourers—who lack stable addresses or digital literacy—are systematically excluded, despite being the most in need of welfare support.