India’s UPI market: projections for growth under various GDP scenarios

This paper projects the nationwide and state-wise size of India’s Unified Payments Interface (UPI) market under various GDP growth scenarios. The market sizes under these scenarios are expressed in monetary values at the scale of both sub-national units and the Indian economy as a whole. With the help of transactions and market share data from Phonepe, a UPI company, the paper estimates the national and state-wise base case scenario market volume of 2021. Panel data across the various states and sub-national units over various quarters from FY 2018 to FY 2021 has been used for the regression analysis. The results emanating from the structural model show that the behaviour related to such digital transactions can be altered by influencing the parameters associated with the variables (financial inclusion, willingness for digital adoption, income levels, digital literacy, and digital inclusion or divide). There are two sets of scenarios considered in this paper. The first set is related to three probable years of achievement of 5-trillion-dollar GDP (viz 2025-26, 2026-27 and 2027-28). The second set is related to two GDP growth figures (an average and below-average) till 2030. In the first set of scenarios, it is found that the size of the UPI market in India can range between INR 242.7 lakh crore (or trillion) and INR 356.3 lakh crore (trillion). In the 2030-31 scenarios, the values of UPI transactions could be in the range of INR 542.7 lakh crore (trillion) to INR 600.7 lakh crore (trillion).