Hurdles to Overcome Before Becoming Digital India

Context: The digital payments system in India has grown significantly in recent years. From June 2021 to April 2023, UPI payments grew at an average monthly rate of 6%. The corresponding figures for NEFT, IMPS, and debit card payments were 3%, 3%, and 1.5%, respectively. This indicates that the popularity of UPI increased at a faster rate than all other modes of payment.

Gaps in Financial Inclusion

  • Number of Inactive-Account: India has the highest share of inactive accounts in the world compared to all the other countries in the database. Of those with bank accounts, 38% have inactive accounts. This might be an outcome of the push for Jan Dhan accounts. Zero-balance accounts were opened to meet official targets, but have been lying dormant since then. 
  • Rural- Urban Divide:
    • While there is no urban-rural divide or income group divide in the possession of bank accounts, differences are evident when we consider the share of inactive accounts. While 31% of the population in rural areas have an inactive account, the share in urban areas is 23%. 
    • If we look at the rural-urban gap in digital payments, India again stands out  with only 30% of Indians in rural areas made or received any digital payment in 2021 as opposed to 40% in urban areas. 
    • This again indicates that a substantial share of the population has been bypassed. 
  • Rich-Poor Divide: Similarly, if we consider the poorest 40% of Indians, 35% of them have inactive bank accounts, whereas the corresponding figure for the richest 60% of the population is 22%.
  • % of Population Carrying Digital Transactions: While the popularity of UPI has increased substantially in recent years, only 35% of the population reported carrying out any digital transaction (making or receiving a payment) in 2021. While this was an improvement from previous years (22% in 2014 and 29% in 2017), India’s figures are unimpressive when compared to the average of 57% for all developing countries and the world average of 64%.
  • Gender Divide: Although digital transactions have grown in value and volume, their growth has not been equal. There is a sharp gender gap in digital transactions. While 41% of the male population carried out any digital transaction in 2021, the corresponding figure among women was only 28%. Also, more women have inactive accounts as compared to men (32% versus 23%). India’s figures are also lower overall compared to the figures in Brazil and Kenya, which are at comparable levels of development.
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Further Initiatives Required to Improve Digital Payments Ecosystem

  • Awareness and Education: Many consumers are still wary about using digital payments and technology; hence companies need to educate their customers on the security advantages of digital payments in a more traditional manner.
  • Internet Penetration & Mobile Phone Accessibility: Currently, internet and mobile phones accessibility at rural and remote areas is poor, hence government and stakeholders involved need to take initiatives in improving internet penetration.
  • Incentives and Rewards: More consumers will switch to digital payments if they receive higher rewards and redeeming rewards with simplicity and faster


Therefore, while India has made big strides, it still has a long way to go in becoming ‘Digital India’.

Mains Practice Question:

“The emergence of the Digital Revolution in the payment ecosystem has initiated financial inclusion in India”. Discuss.

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