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Rising retail payments indicate improving economic activity in India

A QR code of Paytm is seen at a mobile repairing shop in Kolkata
REUTERS/Rupak De Chowdhuri
A QR code of Paytm is seen at a mobile repairing shop in Kolkata, India, November 9, 2021.
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India’s economic recovery amid the covid-19 pandemic is being powered by contactless digital payments, and that, too, those in the retail segment.

While payments data suggest a V-shaped recovery, the wholesale segment lagged behind the pre-covid levels, Mumbai-based research firm QuantEco Research has said.

Digital payments in India grew 16.6% quarter-on-quarter in July-September after registering a sharp contraction of nearly 13% in the previous one, a QuantEco Research report has showed. Since this financial year began, retail payments have clocked a record growth of 31.3% year-on-year compared to 24.6% growth in wholesale.

The primary reason for such a surge was the wider adoption of digital payments solutions like Unified Payments Interface (UPI) and Aadhaar-enabled payment system, among others, following an improvement in consumer demand this year, it said.

“The payments value is set to expand in FY22 with robust growth, backed by supportive base effect, pandemic induced behavioural shifts, unlocking effect, vaccination coverage, and pent-up demand,” the report said.

Indians resorted to digital payments for low-value transactions even in tier-2 and -3 cities.

The Reserve Bank of India’s (RBI) Digital Payments Index, launched in March 2018 to measure the extent of digitisation of payments, stood at 270.59 for March. It was at 207.84 a year ago when India went into a lockdown.

The report suggested a strong correlation between retail payments value and people’s mobility. The more they moved around—movement was severely curtailed during the lockdown—the more they spend.

As of Nov. 13, people’s visits to supermarkets, food warehouses, farmers markets, speciality food shops, and pharmacies, among others, grew 43% (pdf) over the baseline, according to the Google mobility index cited in the report.

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