India’s UPI transactions account for 86 percent of GDP

Story by  Rajeev Narayan | Posted by  Aasha Khosa | Date 12-09-2023
A vendor showing QR code to customer for payment (Image gone viral on Instagram)
A vendor showing QR code to customer for payment (Image gone viral on Instagram)


A chance episode a few years back ushered me and much of India into a new era—where digital technology now possesses us and has changed our world

Rajeev Narayan

It takes but a tweak to bring about discernable change. For me, this happened a few years back, when the missus and I could not find a cab to return home from the Press Club in Delhi. Well a mite past midnight, an auto-rickshaw pulled up and asked where we would like to go. And poof, 15 minutes later, we were below our house—when I tried to pay the quoted fare of Rs 121 in cash with a Rs 500-note, our auto saviour told us he had no change in cash. “PayTM kar deejiye, ya UPI, or debit card bhi chalega (please pay by PayTM, UPI or debit card),” he said in Hindi. I did, and without an extra rupee being charged, he left and we ran up to our cats and dogs.

I was bewildered, for such small incidents are bigger gains achieved. I metamorphosed that day into an initially grudging, but later a perpetually staunch believer. Today, years later, all my utility, food, grocery, and sundry bills are paid online; as is the case with most of India living in cities large and small. Bringing about a tech spurt that changes the business landscape in any nation takes courage and an inherent ethos, one that carries conviction and courage—we have exhibited all these qualities over the last few years.

It wasn’t an easy ride for the Indian Government to make this happen. Sure, start-up ecosystems and innovation bridges through Expos, hackathons, and pitching sessions are a beginning, but people need to be convinced to move on to the next inevitable steps to ensure that we get what it needs to continue on this juggernaut run down the tech pathway. Even in a developing nation such as ours, critical and emerging technologies need to be pushed and embraced. We have lapped it up over the years, thanks to a quantum coordination mechanism with participation from industry and leading academia. A concerted approach was taken by the Government to ensure that the chosen path was followed and set targets achieved.

It is ironic and paradoxical that the two main drivers of India’s digital transformation are hotly debated even today, years after their inception; demonetization and the COVID-19-triggered lockdowns. Demonetization crunched us for cash -the greatest Indian payments preserve and affliction -forcing most to go online. The COVID-19 lockdowns did the same; both changed our lives, digitally and socially, turning even hard-core skeptics into believers.

Look at the numbers to understand the change. Demonetization had a significant impact on the country’s economy, but it also accelerated the growth of digital payments. Before demonetization, digital payments accounted for only about 10 percent of the total transactions in India, but that number has grown to over 35 percent over the years. Since you like numbers, here goes—since November 2016, when Prime Minister Narendra Modi announced the demonetization of all Rs 500 and Rs 1,000 notes, which accounted for 86 percent of the physical cash in circulation, there has been an aggressive promotion and adoption of the digital ecosystem in India.

Chew on this—in 2017, UPI recorded a YoY (Year-on-Year) growth of 900 percent, processing over 100 million transactions worth Rs 67 billion. In 2018, the YoY growth was 246 percent with transactions worth over Rs 1.5 trillion. In 2019, YoY growth was 67 percent with transactions worth over Rs 2.9 trillion. In 2020, UPI recorded a YoY growth of 63 percent with transactions of over Rs 4.3 trillion till December. The year 2021 witnessed a YoY growth of 72 percent, with over 1.49 billion transactions adding up to Rs 5.6 trillion till June alone. By the end of the Calendar Year 2022, total UPI transactions stood at Rs 125.95 trillion, up 175 percent YoY. And interestingly, total UPI transactions accounted for nearly 86 percent of India’s GDP in FY 2022.

This has been a transformation and it is still just the beginning. Today, we are amongst the fastest-growing economies in the world, having overtaken most—through, beyond, and despite COVID-19. It is time to move on more and we are doing just that, overwhelming the most brisk and developed of nations in terms of fiscal prudence, even though we have the world’s largest population. That alone is a call for band, baaja and celebration. I shall truly rejoice, though, only after I see my country become a $ 5 trillion economy, and we are getting there.

The increase in Internet and Smartphone penetration has played a major role in the growth of the digital payments ecosystem. E-commerce has also been a major driver in the growth of the digital payments ecosystem, with Indian e-commerce expected to grow at a CAGR of 31 percent and reach $200 billion (Rs 16 lakh crore) by the Year 2026. This spectacular growth in e-commerce has sparked an increase in online shoppers, expected to reach 220 million by the Year 2025. Our digital payments ecosystem is also supported by private players, such as those offering mobile wallets, UPI payments, and QR code-based payments. If you want a pack of chips, a bottle of water, some vegetables, a burger or even golgappas, you can now go digital, safely and securely.

This week, KV Kamath, former Chairman of ICICI Bank and present Chairman of the National Bank for Financing Infrastructure and Development highlighted that while China went into digital payments early on with Alipay and WeChat Pay, it was outsmarted by India in just a few years. India’s QR payments via UPI have already crossed 10 billion transactions a month, nearly surpassing the monthly transactions of global giants Visa and MasterCard.

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As mentioned before, Indians use the largest quantity of data at the lowest cost; and that is a critical catalyst for the adoption of digital technology by the masses. Elsewhere in the world, data capacity is far lower than in India, while price points are way higher. Statistics show that the average cost of 1GB of mobile Internet data in India is among the lowest in the world. India is amongst the cheapest countries in terms of the cost of mobile data, with some others being Israel, Italy, San Marino, and Fiji. Most of these nations, though, have not evolved as India has in terms of data-digital stack and cutting-edge technologies. That, in itself, produces a unique opportunity, one that we can use as a nation to further scale—not just in our own country, but globally as well. This is a time for terrific growth and a continued international presence.

The writer is a New Delhi-based veteran journalist and communications specialist.