A payment system comprises of a set of instruments, rules, procedures, and technologies used to settle formal monetary transactions among economic agents. Although there can be various types of formal payments, at a consolidated level, payments trace economic transactions in a country.

In case of India, the payment ecosystem with proactive and innovative guidance from the RBI over the past decade has matured with many defining moments attracting international recognition. In the past decade, India has witnessed the introduction of innovative payment systems (like the UPI, Aadhar enabled payments, etc.), entry of non-bank players, and a gradual shift in the customer behaviour from cash to digital payments (amidst shocks from Demonetization, GST, and COVID).

Given this backdrop, and in continuation of our endeavour to build alternative economic datasets, we have now made a formal attempt to capture signals from payments data for tracking overall economic activity in India. We introduce a monthly and a weekly payments tracker (comprising of wholesale and retail payments) along with a proprietary Payments Gap Index to gauge the level of capacity utilization in the economy.

While the aggregated payments data (we have predominantly focused on the value parameter to get a sense of the strength of economic activity) reveal a V-shaped recovery, it is found to be multi-speed in nature with wholesale segment lagging behind in terms of recovery from pre COVID levels. Overall payments expanded by 16.6% QoQ in Q2 FY22 after registering a sharp contraction of 12.9% in Q1. It is comforting to note that sequential movements in payments correlates well with our proprietary DART (Daily Activity and Recovery Tracker) Index and high frequency Google Mobility Indicators.