Relevance: GS III (Economy – Digital Currency) & GS II (Governance) | Source: PIB 

1. What is the Big News?

The Indian government has started a new project in Puducherry to change how food help is given to the poor.

• The Change: From February 2026, the government is sending “Digital Food Currency” instead of regular cash.
• The Goal: This ensures that money meant for food is actually used to buy food. It is a smart way to make sure that “Every Rupee” reaches the right plate without any waste.

2. The Simple Logic: “Locked Money”

To understand this for your UPSC notes, you just need to know one term: Programmable Money.

• What is it? This digital money is “locked” for a specific purpose.
• How it works: If a family gets 1,000 Digital Rupees for ration, that money can only be spent at an authorized ration shop. If they try to use it for a mobile recharge or to buy clothes, the payment will simply not work.

3. Why is this Better for the Common Man?

• No Middlemen: The digital money goes directly from the Reserve Bank (RBI) to the person’s phone. No one can take a “cut” or a bribe in between.
• No Internet? No Problem: Often, ration shops face problems like “biometric failure” or “server down.” This digital currency can work on simple feature phones (button phones) and can even work offline.
• Better Health: Since the cost of basic grains like rice and wheat is covered by these digital tokens, families can use their other cash to buy milk and vegetables. This helps children grow healthier.

4. Quick Facts for Prelims

• The First Step: The pilot project has started in Puducherry. It will soon move to Chandigarh and Dadra and Nagar Haveli.
• The Power Behind it: This is based on the Digital Rupee (CBDC) issued by the Reserve Bank of India. It is as safe as a real 100-rupee note in your pocket.
• JAM Power: It uses the same Jan Dhan, Aadhaar, and Mobile system that India already uses to help people.

UPSC Value Box

With reference to the use of Central Bank Digital Currency (CBDC) in India, consider the following statements:

1. Digital Food Currency is a “programmable” money that can be restricted for use only at authorized ration outlets.
2. The first pilot project to distribute food subsidies via CBDC was launched in the Union Territory of Puducherry.
3. Unlike UPI payments, the Digital Rupee (CBDC) is a direct liability of the Reserve Bank of India.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Correct Answer: (d)