Payments transition in India – Consumer preferences and policy shifts

Subrahmanya N. Kumar, K. Puttanna

Research output: Contribution to journalArticle

Abstract

Economic growth should be supplemented by an efficient payment and settlement system. Many attempts have been made to improve the efficiency of payment and settlement system in India. Especially the effort has been in terms of promoting digital economy. But the stickiness to payments through currency notes by the people has had a moderating effect on these efforts. The policy shift of Government of India towards demonetization of higher denomination currency notes has given thrust to digital payments. The study hypothesizes that post demonetization, the payment and settlement system indicators would show moderate to high deviation from the volume and value that can be forecasted using the historical data. Using Automatic ARIMA Forecasting in EViews, the forecasted values for the indicators for a period from November 2016 to March 2018 were estimated based on the historical data of the indicators from April 2011 to October 2016. The forecasted values of the indicators are then compared with the actual values of the indicators to see if they differ significantly by using paired t-test. The study finds evidence to suggest that the policy of demonetization and resultant reduced supply of currency notes has provided impetus to the Indian public to move towards digital platforms, and the increased supply of currency notes thereafter has not led to complete reversal of this shift in this change in consumer preference. This leads to the conclusion that through effective policy shifts, consumer preferences can be altered, and the Indian economy could become a less cash economy.

Original languageEnglish
Pages (from-to)17-30
Number of pages14
JournalBanks and Bank Systems
Volume13
Issue number4
DOIs
Publication statusPublished - 01-01-2018

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currency
India
Economics
economy
Values
supply
denomination
economic growth
Consumer preferences
Payment
efficiency
Currency
evidence

All Science Journal Classification (ASJC) codes

  • Finance
  • Organizational Behavior and Human Resource Management
  • Marketing
  • Management of Technology and Innovation
  • Law

Cite this

Kumar, Subrahmanya N. ; Puttanna, K. / Payments transition in India – Consumer preferences and policy shifts. In: Banks and Bank Systems. 2018 ; Vol. 13, No. 4. pp. 17-30.
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Payments transition in India – Consumer preferences and policy shifts. / Kumar, Subrahmanya N.; Puttanna, K.

In: Banks and Bank Systems, Vol. 13, No. 4, 01.01.2018, p. 17-30.

Research output: Contribution to journalArticle

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