The Impact of Digital Payments on Money Supply in the Indian Economy: A Study on the Cashless Economy

Abstract

A transformative shift in the Indian economy has taken place in a very short time, primarily due to the widespread adoption of digital payments. Initiatives of the government such as Digital India and technologies like Unified Payments Interface (UPI) have fuelled this change. This paper aims to examine the influence of digital payments on money supply in the Indian economy, with special emphasis on their impact on currency circulation, banking systems, and monetary policy. It will also look into their linkage with financial inclusion, along with opportunities and challenges in a cashless economy. The findings indicate that the inclusion of digital payments is now changing the dynamics of the money supply in India, reducing dependence on cash, yet placing further risks and challenges before the policymakers.