Tamanna Singh Dubey
University of Michigan, Stephen M. Ross School of Business
Amiyatosh Purnanandam
University of Michigan, Stephen M. Ross School of Business
Working Paper
JEL Codes:
G10, G20, H40
● Can Cashless Payments Spur Economic Growth?
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After the introduction of a nationwide Unified Payment Interface (UPI) in 2016, India has become one of the world's leading economies for cashless transactions. We exploit the heterogeneity in the intensity of the adoption of digital payments across districts to show that the household income increased significantly in districts with higher intensity of cashless transactions after the launch of UPI. These households started a significantly higher number of new businesses and earned higher business income after the launch of UPI. We achieve identification by exploiting the within-district-year variation in the effect of cashless payments on economic outcomes across households who are differentially impacted by the adoption of digital payment. Specifically, we show that the impact of digital payments is stronger for self-employed households, such as hawkers and traders, compared to others. Relaxation of borrowing constraints and reduction in the transaction cost of payments are two principal mechanisms behind our findings.

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