At a time when the government is proposing to allow the levy of a charge on UPI transactions, an evaluation exhibits that the expansion within the worth of UPI transactions has been slowing for the final 5 years, whereas the expansion of money with the general public has been quickening over this era.
Paywall: On a charge on UPI transactions
Whereas slowing, the expansion of UPI transactions stays quicker than the expansion of money among the many public, however this margin is shrinking. Specialists say that is each an indication of upper financial exercise and better value ranges than are being mirrored within the official inflation knowledge.
UPI and RuPay debit card transactions are at present free, like money transactions. Nonetheless, the federal government handed the Taxation and Different Legal guidelines (Modification) Invoice, 2026 within the recently-concluded Monsoon session of Parliament, which allows it to permit a Service provider Low cost Price (MDR) cost to be levied on these digital transactions.
Money is again
An evaluation by The Hindu of knowledge from the Reserve Financial institution of India exhibits that the expansion fee of money with the general public reached a latest excessive of about 17% within the COVID-19 pandemic yr of 2020-21. Thereafter, the expansion of money with the general public fell persistently till 2023-24, the place it hit about 4%.
Money with the general public is the entire money in circulation minus what’s sitting in banks.
Since then, the expansion of money with the general public has been quickening. That’s, this development fee rose to six.5% in 2024-25 and additional to 12% in 2025-26. In 2026-27, money with the general public, at ₹41.8 lakh crore as of July 31, 2026, was almost 13% larger than in the identical interval of the earlier yr.
Finance Minister Nirmala Sitharaman and the Funds Company of India have made assurances that most of the people wouldn’t must pay the MDR cost on UPI transactions and that it might solely be levied on sure excessive worth retailers and transactions.
Nonetheless, the Opposition has stated that the retailers who do must pay this cost would go that larger price onto their prospects within the type of larger costs and that this might push individuals again to utilizing money.
UPI slowing however excessive
UPI transactions, alternatively, have seen their development slowing over the previous few years, as per knowledge with the Nationwide Funds Company of India (NPCI). The worth of UPI transactions carried out within the nation grew 133% in 2019-20, which then slowed to a comparatively strong 95% in 2020-21 because the economic system locked down.
It then quickened once more to 105% in 2021-22 because the economic system opened up and pent-up demand mixed with well being fears over dealing with money to push up UPI utilization.
Since then, nonetheless, the expansion within the worth of transactions executed on the UPI platform has persistently been slowing, with development hitting 20.3% in 2025-26. In 2026-27, this has additional slowed to 18.7% as of August 2026, as in comparison with the April-August interval of final yr.
Nonetheless, this 18.7% development in UPI transactions continues to be larger than the 13% development in money with the general public in the identical interval.
Inflation doubtless understated
In keeping with Pronab Sen, former Chief Statistician of India and former Chairman of the Standing Committee on Statistics, the truth that each money and UPI are rising needs to be displaying itself within the type of larger inflation charges than what the official numbers are at present displaying.
“This is able to suggest that we’re undercounting inflation, as a result of that’s the place this could present up,” Mr. Sen informed The Hindu. “If there may be more cash being transacted, each digitally and in money, then that ought to present up in inflation. The primary impact can be there.”
“A number of this may very well be defined if the official knowledge confirmed costs have been rising quicker than they’re,” he added.
The newest official retail inflation knowledge for July 2026 stood at 4.45%, barely larger than in June, whereas the wholesale knowledge confirmed inflation had slowed marginally to 9.8% in July from 9.9% in June.
Indicators of strong economic system
D.Okay. Srivastava, chief coverage advisor at EY India, says that simultaneous money and UPI development is an indication of a vibrant economic system.
“The primary purpose is growing financial exercise usually,” Mr. Srivastava stated. “That’s to say, excessive development charges. Now we have been sustaining an actual development fee in extra of seven% within the post-COVID years. That’s the important purpose why each money transactions and digital transactions have elevated.”
Mr. Sen, nonetheless, warned that a rise in money transactions might additionally level in the direction of misery within the economic system introduced on by excessive unemployment, particularly among the many youth.
Printed – August 15, 2026 07:23 pm IST
