Small town India and freelancers will help Indian economy achieve the $5 trillion size: Report

Digital payments will continue to grow by 40 to 45 percent over the next two years with the blockchain-based business payments volume reaching $4.4 trillion by 2024, said Razorpay in the seventh edition of its fintech report released on January 12.

Tier two and three locations in the country are adopting digital payments quickly and will play a crucial role in driving the country a step towards a $5 trillion economy, the report added.

Further Razorpay believes that the pandemic has opened fresh opportunities around digitising the supply chain and logistics business, which was always cash-dependent. Simultaneously, fresh business opportunities have opened up in digitising transactions for micro-entrepreneurs and freelancers, the report said.

Razorpay expects this market to become 50 percent of the overall workforce volume and attain a market size of $25 billion by 2025.

While COVID-19 caused digital payment volumes to decline by more than 30 percent in the first half of 2020, in the months between September and December, the volumes jumped 40 to 45 percent, mainly driven by transactions in utilities, gaming, financial services and ecommerce.

The report further said that in terms of contribution to the overall digital payments landscape, Bengaluru, Delhi, and Hyderabad led the race with 18.5 percent, 8.9 percent, and 8.1 percent. However, last year the cities’ share was 23.4 percent, 9.4 percent, and 7.8 percent shares of the total digital transactions.

Interestingly, calendar year 2020 saw financial services becoming the most used sector for digital transactions with a share of 24 percent compared to 20 percent a year back. Last year’s leader, the food and beverages sector slumped this year, given the pandemic disrupted consumer’s habit of eating out. Gaming emerged as the runner up with 15 percent this year. While Gaming became second, utilities and bill payments, a sector which saw massive digitisation due to COVID-19 became the third most used sector with 13 percent share of overall digital transactions.

Among the large sectors, travel, entertainment and food and beverages as sectors saw the biggest decline in 2020. Razorpay data showed travel was down 56 percent, entertainment 43 percent and food and beverages 15 percent.

Among states which showed the highest increase in adoption of digital transactions are Assam, Chandigarh, Kerala, Arunachal Pradesh and Punjab, all recorded 120 and 200 percent growth year on year.