The Impact of Cashless Policies and Digital Banking on Economic Growth: Evidence from India

Abstract This paper analyzes the impact of cashless policy and digital banking on India’s economic growth in 2016-2024. The data were collected from the Reserve Bank of India, NPCI, World Bank databases, and analyzed to identify patterns and trends. The paper finds that India processed more than 13,000 crore digital transactions in 2023-24 as compared to 2,000 crore digital payments in 2017-18. A correlation of 0.8-1.2 was discovered between the rise of India’s digital payment penetration by 10% and the increase in the formal sector’s contribution to GDP. The paper examines the UPI growth trajectory, financial inclusion trends, and tax and credit access channels through which India’s shift towards cashless transactions could have impacted the country’s economic growth. The results of the research demonstrate that India’s formal economy is growing due to digitization and improved tax collection, but the rural and urban populations do not appear to benefit from this trend equally.