The latest numbers may be seen as an indicator that consumer economic activity is keeping steady despite an overall slowdown in the economy. India’s GDP growth rate has fallen below 6 per cent. While consumer spending has dropped in the automobile sector, telecommunication industry’s debt is ballooning and Indian banks are batting against bad loans..
However, the trend may also mean that more and more transactions are happening digitally, instead of cash transitions, which do not conclusively point to the fact that consumption is rising.
In digital payments, a host of players are expanding the ecosystem and acceptance of mobile payments. Players like PhonePe, Google Pay, Paytm, and half a dozen others are offering incentives and cash-backs to consumers for paying through their apps.
Banks have also come forward to launch UPI
over their own banking applications. Also, under the UPI 2.0 framework, people can now subscribe to initial public offerings (IPOs) through UPI, a feature that is now being rolled-out selectively and was used in the recent IPO of Affle.
A major push behind digital payments
is by the government itself. In the 2019 Union Budget, the Center announced that certain businesses will not have to pay a digital payments
charge called MDR (merchant discount rate) if they accept payment over digital means including UPI. This had led to a host of retailers and supermarket chains to market UPI and card payments at their cash counters.
According to reports, the government is also planning to incentivise the use of QR-codes (used for UPI payments) by offering merchants tax incentives.