DIGITALISATION AND ITS IMPLICATIONS FOR MONETARY
POLICY - REPORT ON CURRENCY AND FINANCE (RCF) 2023-24
NEWS: India’s digital economy
poised to constitute 1/5th of GDP by 2026: RBI report
WHAT’S IN THE NEWS?
REPORT ON CURRENCY AND FINANCE :
Overview:
- India's digital payments
market is one of the fastest-growing globally, with an estimated market
size of $3 trillion in 2023, reflecting a CAGR of 27% from 2018.
- Growth drivers include
initiatives and reforms by the government and private sector.
Key
Growth Enablers:
- Unified Payments Interface
(UPI):
- Developed by the National Payments
Corporation of India (NPCI).
- Tenfold growth in volume
over four years: from 12.5 billion transactions in 2019-20 to 131 billion
in 2023-24.
- Represents 80% of all
digital payment volumes.
- Other Digital Payment Modes:
- Mobile wallets, net
banking, and card payments also contribute significantly.
Significance:
- Enhances India's external
trade in goods and services.
- Reduces costs of receiving
remittances, leading to increased remittances and savings.
Concerns:
- Impulsive Spending and Herd Behaviour:
- Digital platforms enable
rapid dissemination of financial trends.
- Can lead to herd behaviour,
such as mass buying or selling of stocks, and potential bank runs.
- Data Safety:
- Data breaches cost $2.18
million in 2023, a 28% increase since 2020.
- Common attacks: phishing
(22%) and stolen/compromised credentials (16%).
- Impact on Monetary Policy:
- Digitalisation affects
inflation, output dynamics, and financial policy transmission.
WAYAHEAD:
- RBI's proactive policy
measures to harness digitalisation benefits while mitigating risks.
- Cross-border digital trade
policies are crucial for building trust and coordinating on regulatory
aspects like data security and cybersecurity.
- Progress on
internationalisation of the rupee supported by a comprehensive policy
approach.
Source: https://indianexpress.com/article/business/india-digital-economy-gdp-rbi-report-9482745/