India is breaking new ground daily, consistently surpassing global benchmarks in both speed and scale, leaving its international counterparts trailing. Almost close to half of global digital transactions happen in India. India’s GDP surged by 8.15% year-on-year for FY 2023-24, solidifying its position as the world’s fastest-growing major economy.[1] Its GDP growth is forecast to be 7% for FY 2024-25. In 2024, a new record was set in terms of foreign exchange reserves crossing $700 billion for the first time in history.[2] Currently holding the title of the fifth-largest economy in the world, India is on the brink of becoming the third-largest economy globally, with IMF projections indicating it could achieve this milestone by 2027.[3] UPI has been the cornerstone of this economic development.
Fostering Inclusion and Bridging Gaps
Simple and mobile-friendly, UPI empowers every Indian to participate in digital transactions, fostering inclusion that’s essential for economic growth. In October 2024 alone, the Unified Payments Interface (UPI) processed a staggering 16.6 billion transactions worth Rs 23.5 lakh crore alone, reflecting a 45% increase from the previous year.[4] Its previous peak was 15.04 billion in volume terms in September 2024. UPI on October 31st, 2024 also set a record with 6440 lakh transactions in a single day (Diwali) —a landmark in India’s digital payments journey! It underscores the collective efforts of every Indian towards embracing technology. This achievement aligns with the nation’s vision of a cashless and inclusive economy.
Additionally driven by festive spending surge, UPI is India’s go-to solution for small-value fund transfers, with a remarkable 622 banks in 2024 are on board in just a year, from 492 banks—transforming the way we transact![5]
Having handled over 80% of digital transactions, UPI, interestingly has penetrated urban and rural areas alike effectively dispelling the myth that digital payment systems are only popular in metropolitan regions.[6] Its success in bridging the financial gap in rural India is particularly noteworthy, as millions who previously lacked access to formal banking services are now engaging with digital transactions. With the rise of gig and freelance work diluting the rural-urban divide for livelihood opportunities in India, UPI has provided to a enabler- one that has simplified payments for self-employed individuals, thus supporting income opportunities that align with India’s employment trends and inclusivity.
Shrinking the Informal Economy
India’s informal economy size has shrunk to 15-20% of the gross value added (GVA) as per SBI research in 2020-21 and UPI is a prime contributor to this phenomenon. It has digitised transactions, making financial flows more transparent reducing cash-based, and informal transactions that evade taxation. Internet usage for business has skyrocketed from 7.7% in rural areas to 30.2% in urban regions in 2022-23, marking a 7.2 percentage point surge, showcasing the informal sector’s swift embrace of digital payment solutions. This shift has invariantly pushed India towards fairer tax structures and increased government revenues, crucial for public spending on infrastructure, healthcare, and education.[7]
UPI ripple effects are nothing short of extraordinary as research validates that a 1% increase in UPI transaction volume strongly correlates with a 0.03% increase in GDP growth.[8]
UPI aligns with the Digital India mission by fostering a digital-first economy and serves as a model for Self-Reliant India by building indigenous technology.
UPI has provided micro, small, and medium-sized enterprises (MSMEs) with a reliable digital platform to accept payments, helping reduce dependence on cash and bringing these businesses into the formal economy. This shift has improved creditworthiness and allowed these businesses to grow, contributing to GDP. This is validated by a recent research that notes that microloan disbursements have doubled from 2018 to 2023 due to the powerful synergy between UPI transaction volumes and the growth of microfinance.[9] The rapid adoption of UPI has also set a foundation for future digital advancements in banking, insurance, and other sectors, supporting the national agenda for self-sufficiency and technological leadership.
UPI, builds on trust through its linkages with Aadhaar—a digital identity system covering 140 crore Indians —ensures secure and reliable transactions, which has been fundamental for various welfare programs, ensuring that subsidies and benefits directly reach beneficiaries. This direct transfer mechanism has minimised leakages with the gains closing in to Rs. 3.4 lakh crore since inception and ensures timely support for the needy.[10]
A Model for Global Payments
UPI has empowered real-time transactions for major international markets like the UAE, Singapore, Mauritius, Bhutan, Australia, Canada, Hong Kong, Oman, Qatar, the United States, Saudi Arabia, the United Kingdom, Nepal, and France, revolutionising cross-border payments. Its international appeal lies in its simplicity, security, and scalability, unbeatable even by Chinese apps. This international presence has enhanced India’s soft power and showcased its technological advancements.[11] The dominance and widespread adoption establish the efficiency of UPI, marking it as the model for other countries to emulate. This success has further deepened the power Indian era, discussed not only in the country but also at the global level. Thus, UPI is not just a payment system; it’s a stepping stone towards a Viksit Bharat, connecting dreams and fueling the aspirations of millions to a reality, that is backed by 100% credibility and legitimacy.
[1] https://www.worldbank.org/en/news/press-release/2024/09/03/india-s-economy-to-remain-strong-despite-subdued-global-growth
[2] https://economictimes.indiatimes.com/news/economy/indicators/with-growing-economy-india-has-4th-largest-forex-reserves-after-china-japan-switzerland/articleshow/114843471.cms?from=mdr
[3] https://www.indiatoday.in/business/story/indias-growth-better-than-expected-to-become-3rd-largest-economy-by-2027-imfs-gita-gopinath-2583039-2024-08-16
[4] https://economictimes.indiatimes.com/tech/technology/upi-hits-16-billion-transactions-in-october-setting-new-record-aided-by-festive-spends/articleshow/114841720.cms?from=mdr
[5] https://economictimes.indiatimes.com/tech/technology/upi-hits-16-billion-transactions-in-october-setting-new-record-aided-by-festive-spends/articleshow/114841720.cms?from=mdr
[6] https://www.orfonline.org/expert-speak/decoding-india-s-upi-phenomenon-a-digital-revolution-with-global-implications#:~:text=Our%20working%20shows%20that%20a,UPI’s%20role%20in%20economic%20expansion.
[7] https://economictimes.indiatimes.com/industry/banking/finance/upi-usage-surges-in-india-on-the-back-of-small-businesses/articleshow/111535539.cms?from=mdr
[8] https://www.orfonline.org/expert-speak/decoding-india-s-upi-phenomenon-a-digital-revolution-with-global-implications#:~:text=Our%20working%20shows%20that%20a,UPI’s%20role%20in%20economic%20expansion.
[9] https://www.orfonline.org/expert-speak/decoding-india-s-upi-phenomenon-a-digital-revolution-with-global-implications#:~:text=Our%20working%20shows%20that%20a,UPI’s%20role%20in%20economic%20expansion.
[10] https://www.orfonline.org/expert-speak/decoding-india-s-upi-phenomenon-a-digital-revolution-with-global-implications#:~:text=Our%20working%20shows%20that%20a,UPI’s%20role%20in%20economic%20expansion.
[11] https://www.lowyinstitute.org/the-interpreter/india-s-plan-world-without-cash
