[Read part one here.]
In 2021-22, the government allocated Rs 1,500 crore to the Ministry of Electronics and Information Technology (MeitY) aimed at the promotion of digital payments. Out of this, Rs 1,300 crore was allocated for various financial incentive schemes for acquiring banks to promote RuPay debit cards and low-value Bharat Interface for Money-United Payments Interface (BHIM-UPI) transactions (up to Rs 2,000).
This provided a boost to the acquiring segment of the payments business, in terms of promoting homegrown payment products like RuPay and BHIM UPI. The remaining Rs 200 crore was spent on the promotion of digital payments for unorganised sectors including street vendors, sector-specific schemes, contactless payment solutions, and digital payment solutions using feature phones, and in awareness campaigns and capacity building to increase the penetration of digital payments in the market.
In the following year, 2022-23, the budget of Rs 1500 crore was maintained for further developing digital payment infrastructure and promoting innovations in tier II and III cities that have witnessed significant growth in the past couple of years. Some part of it was set aside for the Payments Infrastructure Development Fund (PIDF) operationalised in 2021. The funds were also used to reimburse UPI/RuPay to make good the zero MDR (merchant discount rate) policy.
This year, the government has decided to shift focus on expansion of the scope of documents available in DigiLocker for fintechs as well as a push to make the know-you-customer (KYC) ecosystem more amenable to digitisation.
However, the digital payments industry has been asking the Finance Ministry for an overall corpus of Rs 8,000 crore instead, which includes Rs 6,000 crore for UPI and Rs 2,000 crore for RuPay debit card transactions to cover the loss, and offset of MDR to merchants.
Fostering a Digital Payments Ecosystem: Role of Government Initiatives
The government has taken various initiatives over the years to foster a digital payments ecosystem, the Digital India Programme being one of them. It is a flagship program of the Government of India launched on 1 July 2015, with a vision to transform the country into a digitally empowered society and knowledge economy.
Digital India is a major contributor to the economy with the digital economy's contribution to India's GDP increasing from 4-4.5 per cent of the GDP in 2014 to 11 per cent in 2023. As a part of the 2023-24 budget the government announced an outlay of Rs 4,795.24 crore for the Digital India Programme which was a 37 per cent decrease from last year's actual outlay of Rs 7,603.5 crore. Whereas last year, MeitY had received around Rs 10,676,18 crore for Digital India in the Budget, a 67.13 per cent jump from Rs 6,388 crore the previous financial year.
Another such initiative is the Pradhan Mantri Gramin Digital Saksharta Abhiyan (PMGDISHA) launched under the Digital India program aimed to promote digital literacy in rural areas with a target to make 6 crore people digitally literate, which is 40% of rural households by covering 1 member from every household.
The training provided is free of cost and the participants are introduced to topics relating to digital services, their usage, the internet, operating cashless transactions, digilocker, and other citizen-centric services.
PMGDISHA is a significant step in India's efforts to equip rural citizens with digital skills promote digital literacy and expand the reach of digital technologies to rural areas So far around 6.69 million have registered and 4.3 million have been certified which is far from the Govt’s target of 60 million digitally literate people. The hierarchy of high registration rate to low certification rate is prevalent in every state/UT, however, PMGDISHA has performed well in UP with a high registration, training, and certification rate compared to other states.
No. of individuals who are registered, trained certified after the completion of the course.
Source: CNES-InfoSphere.
From Past to Possibilities: Exploring Untapped Horizons of India's Digital Infrastructure
The future of UPI holds exciting possibilities, poised to revolutionize digital transactions in the coming years. One potential future advancement lies in the integration of voice recognition technology, streamlining the payment process. Users could simply articulate their payment instructions, and UPI would seamlessly execute the transaction, enhancing accessibility and extending the reach of digital payment solutions. Moreover, UPI stands to benefit from the incorporation of blockchain technology.
This integration could bring about advantages such as data immutability, instantaneous transaction validation, and heightened privacy, further bolstering the reliability and security of UPI transactions. As UPI gains global recognition, the horizon for cross-border remittances looks promising. The prospect of international remittances via UPI could simplify procedures, reduce expenses, and offer a more efficient alternative to traditional methods like wire transfers.
Looking ahead, industry projections paint a compelling picture for India's consumer digital economy, with an anticipated market size of approximately US$800 billion by 2030—a remarkable tenfold increase from 2020. This growth is fueled by the rapid expansion of internet access and the widespread prevalence of smartphones, acting as catalysts for the surge in online activities, including e-commerce and digital payments.
Goldman Sachs predicts a substantial increase in the future valuation of digital marketing in the Indian internet business, reaching US$160 billion by 2025—a threefold jump from its present value. Additionally, EY, forecasts that e-commerce is poised to capture 11.4% of the total Indian retail market by 2026. These trends collectively paint a vibrant picture of the future landscape, where UPI plays a pivotal role in shaping the digital economy of India.
(This is the second in a two-part explainer by the CNES InfoSphere team from its latest edition, as part of its special research series on Arthvyavastha: Measuring the State of the Indian Economy. To review InfoSphere’s research work, please view its website here. The author would like to thank the InfoSphere team (Aditi, Amisha, Aryan, Vasudevan, Jheel, Aman) for contributing towards this edition.)
(Deepanshu Mohan is a Professor of Economics and Director, the Centre for New Economics Studies (CNES), Jindal School of Liberal Arts and Humanities, O P Jindal Global University. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for them.)
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