Digital payments, economic growth and currency in circulation: empirical analysis in indian context
- Digital Payments, Currency in circulation, Electronic payments, Financial Market Infrastructure, Economic growth, Vector Auto RegressionI also will control the published article. Please, I am requesting your help and support.
The digital payments landscape has undergone substantial transformation due to emergence of electronic modes of payment in India. Despite the growth of digital payments both in terms of value and volume, there is an incessant demand for cash. Lot of cost is involved in printing, handling and transportation of cash. In this paper,we have tried to investigate the relationship between economic growth and digital payments in order to expedite transition towards cashless economy. We employed vector auto regression to explore the relationship between digital payment modes and economic growth of India. Our empirical findings indicate that digital payment modes such as Real Time gross Settlement (RTGS) and Retail payments play a crucial role in economic growth. However, prepaid instruments and mobile payments are yet to play a significant role. Further, the empirically findings suggest that rise in electronic retails payments modes reduce the currency in circulation. We, therefore, suggest that Central Bank should continue to develop Financial Market Infrastructure (FMI) and undertake reforms to integrate the present payment system with global financial institutions in order to boost digital transactions in India.