India is rapidly solidifying its position as a global leader in digital transformation, driven by the internationalisation of the Unified Payments Interface (UPI), according to a recent Reserve Bank of India (RBI) report. UPI achieved a record-breaking milestone of 16.6 billion transactions in October, reflecting its growing adoption and enhanced capabilities, including an 86% success rate for instant debit reversals, up from 77% a year earlier.

RBI Deputy Governor Michael Debabrata Patra highlighted UPI’s impact, describing it as an open-ended system that integrates multiple bank accounts into a single mobile app, facilitating seamless inter-bank and peer-to-merchant transactions.

Patra also pointed to innovations like Account Aggregators, Open Credit Enablement Network (OCEN), and the Open Network for Digital Commerce (ONDC) as key contributors to productivity gains. ONDC now operates in over 720 cities, with 49.72 million orders processed as of March 2024. Additionally, the Trade Receivables Discounting System (TReDS) is addressing MSME credit gaps, estimated at ₹52.2 trillion, by connecting businesses with banks and clients, reducing funding costs by up to 2.5 percentage points. The value of invoices financed through TReDS has surged 23-fold since inception.

India’s digital economy is further bolstered by widespread internet penetration, with 40% of the rural population and 78% of those aged 20-30 years actively online. E-commerce activity is robust, with one-third of households making online purchases of consumables and services, and significant engagement in consumer durables and food purchases. Embedded financing’s share in FinTech funding has also risen from 2% in 2020 to 9% in 2024, reflecting its growing role in the digital ecosystem.

A new index measuring India’s digitalisation, constructed using a dynamic factor model, underscores the transformative impact of digital technology on the economy and monetary policy transmission. “The index has been rising, reflecting the ongoing digital revolution,” noted Patra.

India’s strong digital public infrastructure, vibrant IT sector, burgeoning youth population, and significant AI talent base uniquely position the nation to unlock new growth opportunities and optimise existing resources, the report concluded.