Exploresearch (ISSN: 3048-815X) ( Vol. 03 | No. 3 | July - September, 2026 )

Transforming Payments, Transforming Welfare: UPI as Digital Public Infrastructure (A Public Economics Cost-Benefit and Comparative Analysis)

Author: Usha Goyal & Priya Goyal

This paper evaluates India's Unified Payments Interface (UPI) as an instrument of public economic policy, asking whether a state-facilitated, zero-cost digital payment rail generates net social welfare sufficient to justify its fiscal and ecosystem costs. Using a four-part methodology: cost-benefit analysis, regression analysis, trend analysis, and cross-country comparison; the study finds that UPI's transaction value, cost savings, financial-inclusion effects, and Direct Benefit Transfer (DBT) leakage reductions have produced a Present Value of Net Benefits (PNB) rising from ₹6,635 crore in 2016-17 to over ₹3,07,37,827 crore in 2024-25, with a Benefit-Cost Ratio (BCR) climbing from 1.46 to over 2,492 over the same period. Regression analysis further shows that UPI transaction volume and cash in circulation move together (β₁ = 0.0682, R² = 0.71, p = 0.0041), rejecting the substitution hypothesis in favour of complementarity, while UPI volume is a strong predictor of India's Financial Inclusion Index (β₁ = 0.000112, R² = 0.85, p = 0.0004). A comparative analysis against Brazil's Pix, the USA's FedNow, and Singapore's PayNow situates UPI as the most rapidly scaled real-time payment system globally, but also the most exposed to a structural sustainability gap under its zero-Merchant Discount Rate (MDR) policy. The paper concludes that UPI has been a highly effective public investment to date, but recommends a tiered-MDR and dual-payment-infrastructure policy framework to secure its long-term fiscal sustainability.

Goyal, U., & Goyal, P. (2026). Transforming Payments, Transforming Welfare: UPI as Digital Public Infrastructure (A Public Economics Cost-Benefit and Comparative Analysis). Exploresearch, 03(03), 51–61. https://doi.org/10.62823/exre/03.03.255

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DOI:

Article DOI: 10.62823/exre/03.03.255

DOI URL: https://doi.org/10.62823/exre/03.03.255

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