Impact of Digital Transactions on Economic Growth of India

At
Angel Broking

T. Sheshu
131319672024

Matrusri Institute of Post Graduate Studies

Affiliated to Osmania University, Recognized by AICTE
#16-1-486/1, Saidabad, Hyderabad-500059.
2020-2021

Project Guide Project Coordinator

C. Prasanthi Dr. Syed Tabassum Sultana
 Impact of Digital Transactions on Economic Growth of India

Introduction

The term digitalization means to deal money digitally with less use of hard form of money or
in a layman’s language using computerized or digitalized modes of transactions is
digitalization. India is a growing economy where 67% of the population is still from rural
areas (World Bank, 2016). No doubt we have achieved the literacy rate of 74% but still a
huge mass of population lacks technological knowledge and so the problem of digitalization
is big in India as compared to other countries in the world. Automated Teller Machines
(ATMs) are the first form of digitalization that was introduced in India in the 1987. It took
more than twelve years by the people to accept it as a mode of transaction. But as the time
has passed people understood how to use it and its importance increased gradually. As the
population increased in India the need of ATMs also increased in various parts of the country
so in order to reduce the rush of ATMs, RBI focused on introducing E-banking in the
country. The main focus of Reserve Bank of India (RBI) was to ensure safer and authorized
payment system to the people. With this objective Electronic Clearing Service (ECS) was
introduced 1990s. In the year 2008 National Electronic Clearing cell was launched to handle
multiple transactions of individuals and corporate. It came as boon for the economy as many
people find it as easy, quick and fastest mode of transaction to transfer their funds to any part
of the world. During this transformation a national level e-Governance plan was initiated in
2006. So keeping the focus on rural areas to expand the e-banking and better internet
facilities “Digital India” campaign was launched on 1st July 2015. The objective of the
campaign is to develop secure and digital infrastructure, delivering government services
digitally and universal digital literacy. According to Internet and Mobile Association of India
(IAMAI) and Kantar IMRB report out of 918 million rural population of India only 186
million are using internet and leaving out 732 million potential users. The ratio of male to
female Internet users is 64:36.

With digital payments, the world is our oyster and at every step, cashless payments are
helping us save time and money. One does not need to withdraw cash to book a cab or pay
the neighbourhood merchant, many of whom now accept cards. Every time you run out of
cash, digital payments make it possible to finish your chores at the market or go home at your
convenience without withdrawing cash from the ATM.While digital payments are yet to
dominate India’s financial transactions completely, they have found their way into the Indian
psyche following demonetization. This shift has become evident in some of the data that
shows a significant increase in acceptance locations in the country from 1.2 million in
December 2015 to over 5 million by end 2018, almost three times growth in less than 3 years.
It is also very interesting to the see the change in digital spending behaviour of Indians in the
past 2 years. Online (Internet based) shopping spends now account for 35 per cent of all
Mastercard card spends. This means more and more Indians are comfortable using their debit,
credit and prepaid Mastercard cards for online shopping versus face to face POS transaction
at a merchant location.

According to the Reserve Bank of India (RBI), as of September 2018, the number of debit
and credit cards has gone up significantly to 990 million and 44 million, respectively,
showing a preference for cashless transactions. We at Mastercard have invested heavily in
protecting and growing the digital payments ecosystem. Supporting theDigital India
initiative, Mastercard has done a thorough research and analysis to gauge the payment
patterns of consumers in this country. We have lowered our debit card fees by 99 per cent for
low value transactions below Rs 200, which forms a large chunk of payments made in cash,
thus assisting in adoption of digital payments in the habit forming daily use category.Cashless
transactions can ensure fast progress and growth of an economy. This is why we are
partnering with the government to contribute to their 30 billion transactions’ target in FY
2018-2019 and also trying to connect 63 million mostly small and medium sized merchants in
the country to increase acceptance of digital payments. This year, the Information and
Technology Ministry revealed that digital transactions in India had risen, in the last two
years, from Rs 79.76 crores in October 2016 to Rs 224.8 crores in August 2018. Change is
the only thing constant and the transition to transactions and growth is likely to catapult India
into the league of developed nations through various benefits. Convenient cashless
transactions enable people to make more purchases in a shorter time. Many people end up
purchasing items spontaneously, thus contributing to economic growth. A rise in the demand
for goods will lead to more production and supply which in turn will create jobs. More digital
transactions also mean additional data will be available to the government for research and
better framing of policies. For India, this could be a huge game changer – corruption can be
checked and the entire financial growth can be mapped in a planned manner.
Need for the Study
The government of India takes digitalization forward rigorously and tirelessly. The
government pushed digitalization through “Digital India” and Demonetization. These
initiatives faced a lot of appreciations and criticisms in India. However, the digitalization
effort has gained the confidence of people and started to pick up. The digitalization has
reached the field of payments and settlement as well. The payments and settlements in India
are dominated by cash and this dominance has gradually been minimized by digital
payments. The study is mainly focused to know the role of digital transactions are playing
any role for the economic growth of the nation. The present study is making an effort to know
the banking digital transactions effect on the growth of the Indian economy.

Review of literature

Jain, P.M (2006) in the article ―E-payments and e-banking opined that e- payments will be
able to check black ―An Analysis of Growth Pattern of Cashless Transaction System.
Taking fullest advantage of technology, quick payments and remittances will ensure optimal
use of available funds for banks, financial institutions, business houses and common citizen
of India. He also pointed out the need for e-payments and modes of e-payments and
communication networks.

Srinivas N. (2006) in his study ―An analysis of the defaults in credit card payments, has
tried to analyze the socio-economic profile of the defaulters of credit cards, to identify the set
of factors which contributed to such defaults and suggest relevant measures to minimize the
default cases. Analysis of reasons indicated that economic hardship is the major reason
identified by majority of the sample units follows by rigid payment structure and loss of
job/business. The main suggestion is that the banks concerned should redesign the payment
structure of credit card defaulters in a flexible and affordable installment.

Zandi (2013) Electronic card payments have a significant impact on each economy which
has adopted it. Greater usage of electronic card payment products added $983 billion in real
U.S. dollars to the GDP of 56 countries they studied from 2008 to 2012.Card payment has
raised consumption by an average of 0.7% across the 56 countries. Asian economies gained
an average growth of 0.06% in their GDPs and 0.12% growth on consumption in the Asian
economies. Further, India‘s GDP gained 0.07% due to the use of electronic card payments
during the period of 2008 to 2012
Sanghita Roy, Dr. Indrajit Sinha (2014). stated that E- payment system in India, has shown
tremendous growth, but still there has lot to be done to increase its usage. Still 90% of the
transactions are cash based. Technology Acceptance Model used for the purpose of study.
They found Innovation, incentive, customer convenience and legal framework are the four
factors which contribute to strengthen the E- payment system.

Saima Khan, Dr. Shazia Khan, Mohsina Aftab(2015) in their research Digitalization and
its Impact on Economy Described Digital conversion of print sources has improved speedily
within the past few years. Conversion is that the social transformation started by the large
adoption of digital technologies to come up with, process, share and manage digital info.
Conversion is a comprehensive technique of preservation and access by that all the
institution’s assets are reworked into digital and making high-quality copies in digital format.

Moinak Maiti, Parthajit Kayal (2017): Digitisation: It’s Impact on Economic Development
and Trade. The performance of the services sector improved considerably since 2000 ahead.
Development in IT and ITES modify and automatic the business method. This resulted in
overall improvement in each producing and services sectors. India’s service sector and
MSME phase have the high potential for future growth with digitisation. The comprehensive
growth of each India’s services sector and MSME phase will provides a boost to the degree
of trade and India’s share with the assistance of digitisation.

Mansi Shukla and Shilpi Bose(2017)Impact of Digitalization in Economy and the effects of
Demonetisation. imply regarding concerning the business dealing from face to face to on-
line, however it's concerning transformation of several sides of the business interactions and
dealings and fragmented up into innovations too. Growing technology advances, larger
purchaser power andincreased competition mean all industries face the threat of development.
India stands on the sting of growth in web and ecommerce activity. The digital economy has
modified the operating of business in today’s world

Mrinalini Kaul and Purvi Mathur (2017) Impact of Digitalization on the Indian Economy
and Requirement of Financial Literacy. Impact of digitalisation on a Country may be assessed
on the idea of its impact on the Government on the Economy and therefore the Society. We
have seen a significant amendment in each Sector with the emergence of Digitalisation. The
Digitalisation has created new Job opportunities, have led to Innovation in terribly sector and
conjointly led to the Expansion of the economy i.e. Have helped within the gross Domestic
product growth of the country.
Objectives of the study

1. To study the association of digital transactions with the Indian Economy.

2. To know the Impact of Digital Transactions on the Indian Economy.
3. To predict the future growth of Indian Economy based on the Digital Transactions.

Hypothesis of the Study

H0: There is no Association of Digital Transactions with the Indian Economy.

H0: There is no Impact of Digital Transactions on the Indian Economy .

Scope of the Study

The present study has been emphasised on the role of the digital transactions on the economic
growth of India. The study will consider the economic growth parameters proxy as GDP and
IIP . The study will consider 11 years secondary data i.e. 2009-10 to 2019-20 and the
following digital transactions will be consider.

 RTGS
 NEFT
 Debit Cards
 Credit Cards
 Mobile Transactions
 ATM Transactions

Research Methodology

Variables of the Study

S. No Variables Proxies

1. Economic growth 1. GDP

2. IIP

2. Digitalization 1. No. of digital transactions And

2. Volume of Digital Transactions of
a) RTGS
b) NEFT
c) Debit cards
 d) Credit cards
e) ATM transactions
f) Mobile transactions

Statistical tools and Techniques

 Stationary test:The study will apply the stationary test – ADF under the unit root
test. The study will use the stationary data for the examination of objectives.
 ARDL: The study will apply the Auto Regressive Distributed Log Methodology for
the examination of association of digital transactions with the economic growth
parameters.
 Ordinary Least Square:The study will apply the ordinary least square method to
know the impact of digital transactions on the economic growth parameters i.e. Indian
economy

Sources of Data:the study is based on the secondary data collected from various sources
such as RBI and other Government websites.

Limitations of the Study

1. The study will consider only two economic factors which are acting as proxy
variables for economy. These two economic variables will not reflectthe complete
economic growth of the country.
2. The study will consider only banking related digital transactions which are related to
B2C segment.

Organisation Profile

Angel Broking

Angel broking is a leading stock-broking and wealth management firm, headquartered in

India. They operate on a unique retail-focused stock trading model that provides
revolutionary trading platforms and expertise to a diversified client base. Founded in 1987,
they have expanded across all major cities in India.
The Angel Group is a member of the Bombay Stock Exchange (BSE), National Stock
Exchange (NSE) and the two leading Commodity Exchanges in the country: NCDEX &
MCX. We are also registered as a Depository Participant with CDSL.

Angel Broking's tryst with excellence in customer relations began in 1987. Today, Angel has
emerged as one of the most respected Stock-Broking and Wealth Management Companies in
India. With its unique retail-focused stock trading business model, Angel is committed to
providing ‘Real Value for Money’ to all its clients.

Vision

To provide best value for money to investors through innovative products, trading/investment
strategies, state-of-the-art technology and personalized services.

Our Motto

To have complete harmony between quality-in-process and continuous improvement to

deliver exceptional service that will delight our Customers and Client

Quality Assurance Policy

We are committed to providing world-class products and services which exceed the
expectations of our customers, achieved by teamwork and continuous improvement.

Products

Angel Broking offers products like

 Equity
 Derivatives
 Commodities
 Currency trading
 Life insurance
 Mutual funds
Services like

 Portfolio management
 Demat account
 Depository services
 Intraday trading calls
  Investment advisory
 NRI services

Board of Directors

 Mr. Dinesh Thakkar (MANAGING DIRECTOR

 Mr. Lalit Thakkar ( DIRECTOR)
 Mr. VinayAgrawal (CHIEF EXECUTIVE OFFICER)

Key Management Team

 Mr. GaganSingla
 Mr. Ketan Shah
 Mr. Naveen Mathur
 Mr. SantanuSyam
 Mr. SubhashMenon
History:

Entrepreneur Dinesh Thakkar started his business in 1987 with a capital of Five Lakhs Indian
Rupees and lost half of the money within eight months. In 1989, he started off again as a sub-
broker. Later, Angel Broking was incorporated as a wealth management, retail and corporate
broking firm in December, 1997. In November 1998, Angel Capital and Debt Market Ltd.
gained membership of National Stock Exchange as a legal entity. The company opened its
commodity broking Division in April, 2004. In November 2007, Birla Sun Life Insurance
joined hands with Angel Broking for distribution of its insurance products. In 2007.the World
Bank Arm International Finance Corporation bought 18% stake in Angel Broking.

Awards:

 2009 - 'Broking House with Largest Distribution Network' Award and 'Best Retail
Broking House' Award at BSE IPF-D&B Equity Broking Awards
 2012 - BSE IPF-D&B Equity Broking Award for ‘Best Retail Broking House
 2012-13 - Among BSE Top 10 Performers in Equity Segment (Retail Trading) FY
2012-13
 2013 - BSE-IPF D&B Equity Broking Award for ‘Broking House with Largest
Distribution Network
 2013 - BSE-IPF D&B Equity Broking Award for 'Best Retail Equity Broking House
 2013-14 - Awarded ‘Top Three Clients Traded Members in Equity’ by the BSE
 2014 - BSE-IPF D&B Equity Broking Award for ‘Broking House with Largest
Distribution Network”