Abstract:

India’s payment ecosystem has undergone a rapid transition from predominantly cash-based transactions toward interoperable electronic payments, with the Unified Payments Interface (UPI) becoming a major retail payment rail. This study examines the relationship between the expansion of digital payments and selected indicators of small-business and MSME performance using authentic secondary data published by Indian public institutions. The empirical analysis uses financial-year observations from FY 2021-22 to FY 2024-25 for retail digital payment volume and value, and UPI volume and value, together with MSME bank-credit observations for FY 2022-23 to FY 2024-25. A supplementary structural indicator is drawn from the Ministry of MSME’s Udyam registration statistics as of 31 December 2024. Data are sourced from the Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), Ministry of Finance/Department of Financial Services, and Ministry of MSME. Percentage analysis, annual growth rates, CAGR, descriptive statistics, and Pearson correlation are used where the number of observations permits. Retail digital payment volume increased from 7,176.90 crore transactions in FY 2021-22 to 22,167.90 crore in FY 2024-25, while UPI volume increased from 4,595.61 crore to 18,586.60 crore. UPI therefore recorded a three-year CAGR of approximately 59.33% in volume and 45.75% in value. Bank credit outstanding to MSMEs increased from ₹22.6 lakh crore in FY 2022-23 to ₹31.3 lakh crore in FY 2024-25, a CAGR of approximately 17.68%. For the three overlapping observations, UPI volume and MSME credit are strongly positively correlated (r≈0.996), while UPI value and MSME credit show r≈0.999; these coefficients are descriptive and cannot establish causality because the time series is extremely short and affected by common macroeconomic and policy factors. The evidence therefore supports a clear coexistence of rapid payment digitalisation and expanding formal MSME credit, while not proving that payment adoption alone caused business-performance improvements. The study concludes that digital payments should be assessed as part of a broader business-enabling ecosystem involving formalisation, access to finance, digital capability, infrastructure, and risk management.

Keywords:

Digital Payments, Small Businesses, UPI, Financial Inclusion, Business Performance, Digital Finance, India

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