Contrary to expectations, the COVID-19 pandemic has negatively impacted the growth of digital payments in India.
Against a growth of 46% in the value of digital payments last year, this year, digital payments growth is on track to be around 11.5%.
In terms of actual numbers, with 20 days remaining in the year, the total value of digital payments made in India during the ongoing financial year (FY20-21) is Rs 4,905 cr — or about Rs 410 cr per month.
Based on this, the full-year number is likely to be around Rs 5,100 cr, representing an increase of only 11.5% over last year’s 4,572 cr.
This is by far the slowest rate of growth for digital payments in India since these were introduced several years ago.
In the previous year, digital payments grew by 46%, while in the year before that, their growth rate was 51%.
In 2017-17, digital payments had grown by a whopping 1.06%, on the back of the impact of demonetization and a nationwide cash crunch.
SURPRISING IMPACT
The slowdown in the growth of digital payments during the COVID-19 pandemic is somewhat surprising and contrary to expectations, particularly given the sharp increase in e-commerce and online shopping seen during this year.
Most consumers have opted to shift more and more of their purchases to the online mode during the current financial year — a year that began roughly when COVID-19 lockdowns also began — to get over the difficulties of stepping out to buy things.
The country’s largest maker of fast moving consumer goods, Hindustan Unilever, for example, noted that the contribution of e-commerce channels to its overall sales doubled during this year compared to the same period of last year.
Even at brick and mortar stores, electronic payments — especially using mobile phones — are considered safer than cash as they reduce the chances of viral communication via fomites.
Therefore, the slow down in growth is likely a sign of the sharp deceleration in economic activity in India during the pandemic months.
Industrial production in India dipped by more than 12% this year due to the COVID-19 pandemic and the subsequent lock-downs.
The country managed to recover from the impact only by around January this year. However, COVID-19 numbers have again started going up over the last ten days, possibly because of the entry of new, more resistant variants of the virus into the country.