Impact of Digital Payments on Indian economy

Demonetization has significantly affected the Indian economy. Demonetization occurred on 8th Nov. 2016 which demonetized all the 500’s and 1000’s rupee notes, which were accounted to be around 80% of the cash circulation in the economy. This event led to shift from the use of physical notes to digital payments. With most of the people having a smart phone and access to the internet, digital payments has become significantly important.

One of the major initiative in process of making economy cashless was Unified Payments Interface (UPI) which allow real time inter-bank transaction and Bharat Interface for Money app (BHIM).

UPI was launched by National Payments Corporation of India (NPCI) in 2016 and after demonetization it has been one of the most used platform for day to day transactions, not only it has made transaction quicker and easier, whether be it buying groceries or fueling up tank or buying vegetables for street vendors, upi is now available almost in every shop.

These statistics shows how people have adopted UPI and found it convenient and secure platform over the year.

Advantages and impact of digital payments:-

·       Cashless Economy- It has played a crucial role in promoting the goal of Indian government to be a cashless economy. As UPI transaction does not include cash so it decreases the flow of physical currency in the economy and also reduces the risk and hassle associated with holding the money. It brings transparency in the economy.

·       Helpful to small business- It has helped micro and small business by enabling them to accept digital payments. With the help of infrastructure businesses can setup digital infrastructure.

·       Boosted E-commerce business- Digital payment has played a huge role in promoting E-commerce platforms. By providing seamless online transaction allowing consumer to shop online without any inconvenience.

Where everyone is using digital payment which has made payment method much convenient there has been also some demerits.

Limitation of digital payments:-

·       Accessibility- in India not everyone has access to smartphones and stable internet connectivity which can limit the reach of digital payments.

·       Concerns regarding cyber security- there’s a risk of cyberattack like hacking or fraud which is one of the major concerns because lately there’s been a lot of financial scam.

·       Financial Literacy – Lack of financial literacy can scam people or misuse of digital financial products. So educating the people and making them aware is a must.

Written By: Mayank Dhek