UPI Transactions in India are touching new highs every month. But are these transactions truly leading India towards a cashless economy? Let’s find out!
Unified Payments Interface (UPI) transactions touched a new high of 7.3 trillion in October 2022. This is an increase of about 75% over the same period last year.
However, a detailed analysis by the National Payments Corporation of India (NPCI) on various payment systems shows that about 75% of the total volume of retail transactions (including cash) is below Rs 100 transaction value. Further, 50% of the total UPI transactions have a value of up to Rs 200.
Is India Moving Towards a Cashless Economy?
A major conclusion from increasing UPI transactions is that cash in circulation has come down. Well, this is not true!
The currency in circulation stood at $32.2 trillion as of October 2022. The currency in circulation to GDP ratio stood at 12.9% as of June 2022. This ratio was around 12% before demonetisation.
Hence, smaller monetary transactions which previously happened in cash are now happening through UPI. This also means that larger transactions are still happening in cash.
To summarise, increasing UPI transactions benefit the economy as it helps develop an income trail for many merchants who carry out small transactions using UPI. This proves beneficial when they make enough money to start paying income tax.
However, from 1st January 2023, the NPCI’s order to cap the market share of any UPI player to 30% will come into effect. This will hurt the dominant players like PhonePe and Google Pay, which have 46% and 33% market shares, respectively.
What effect will this rule have on UPI transactions in the economy? We will have to wait and watch till the new year rings in!