Electronic payments dominate India's sari shops and street food stalls.
Brij Kishore Agarwal's sari shop in Old Delhi ### Digital Transformation
A few decades ago, it was common for customers at Agarwal's sari shop in Chandni Chowk market, India, to leave with a large bundle of colorful, embroidered garments and a hefty pile of cash. Agarwal, now 79, would often worry about burglars stealing the money before he could deposit it in the bank.
Nowadays, Agarwal can sleep more peacefully. Most of his customers make their purchases using digital payments, which has become commonplace throughout India, the world's most populous country.
Today, citizens from all walks of life use UPI, a digital payment system that allows users to transfer funds instantly by scanning a QR code. This revolutionary system has transformed daily life, from tea vendors collecting money through mobile apps to tuk-tuk drivers paying for snacks with their phones.
This digital payment phenomenon could play a significant role in India's ambition to become an economic superpower. With a $3.1 trillion economy, Prime Minister Narendra Modi, seeking a third consecutive term, has stated his goal of wanting India to be considered 'developed' by 2047.
Eswar Prasad, an economics professor at Cornell University, believes that digital payments will foster growth in India by eliminating frictions, increasing efficiency, and reducing costs. He also stated that UPI and broader digitization of the economy can increase the inclusiveness of this growth.
From Scarcity to Ubiquity
India's journey to a digital economy began roughly 15 years ago, but digital payments were initially slow to gain traction, and in 2016, 96% of transactions were still made with cash.
Two significant events changed this. The National Payments Corporation of India (NPCI) launched UPI, which enables users to use their phone as a virtual debit card, transferring funds without entering bank details or paying transaction fees.
In November 2016, the government suddenly withdrew two large banknotes, representing 86% of all currency in circulation, allegedly to combat corruption. This forced many, like Ramesh Kumar, a towel shop owner in Delhi's Sarojini Nagar Market, to accept digital payments.
Covid-19 also accelerated the mass adoption of digital transactions, as people sought to protect themselves from the virus.
Indians now use UPI for everything from buying vegetables to consulting doctors. The sheer volume of digital transactions in India is unmatched globally. In 2023, transaction volumes surpassed 100 billion.
Some people, like Azeez, a 34-year-old rickshaw driver in Old Delhi, remain skeptical about digital payments.
"I'm too nervous about losing money to use e-payments. I'm not educated, I'm poor, and I've never been to school. What if I make a mistake?", he says.
Despite some hesitation, the trend of increasing digital transactions is likely to continue, increasing the value of funds flowing into the formal economy. UPI aims to achieve two billion transactions daily by 2030.
'Our Shop is Moving Forward'
India has become the world's fastest-growing major economy, and digitization has undoubtedly contributed to its remarkable progress.
Although it's difficult to measure UPI's direct impact on India's GDP, its benefits are evident. At a micro level, Agarwal reports increased efficiency and transparency for his business, while Kapil Sharma, a flower seller outside a Delhi temple, has seen a sharp rise in sales since adopting digital payments.
"It's more convenient," says Sharma, who sells flowers for as little as $0.12. "Customers can just buy, pay, and go."
India's digital public infrastructure has also contributed to a 80% financial inclusion rate, giving rise to a sense of ownership among average citizens over the country's economic growth.
As Agarwal states, "If a small, old shop like mine can adapt and change, how much more can the average buyer or customer?"
The impact of digital payments on the Indian economy is undeniable and has significantly fostered growth and efficiency. Prasad concludes by observing, "This digital revolution has provided a stake in India's economic growth and transformation for even the most ordinary citizens."
NPCI is currently dedicated to increasing UPI's reach globally, enabling Indians working abroad to easily send money home or enabling Indian tourists to make payments using UPI. This year, the Eiffel Tower's official website even began accepting payments via UPI.
Prasad believes that the government views the UPI as a blueprint for the global financial landscape. "I think it would significantly enhance India's standing on a global scale," he adds.
While the implications for UPI beyond India remain to be seen, it enjoys widespread support from those already using it, signifying a likely further expansion of its influence in the country.
"If anyone offers me a chance to revert to cash transactions, I will simply refuse," says Agarwal. "Just find a mobile phone, download these apps, and use them."
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Source: edition.cnn.com
