By CS Mohapatra & Depannita Ghosh, Respectively Investor Education and Protection Fund (IEPF) chair professor and research analyst, IEPF Chair Unit, at the National Council of Applied Economic Research
India’s dream of becoming a developed nation by 2047 is closely tied to the potential of its digital economy. From fintech innovations to digital governance, its transformation is being powered by technology. Flagship initiatives such as Digital India, the Jan Dhan-Aadhaar-Mobile (JAM) trinity, and the Unified Payments Interface (UPI) have expanded digital access in ways once unimaginable.
But as the country surges ahead, a critical question arises—who is being left behind?The digital payments ecosystem in India has seen a meteoric rise. In 2024 alone, UPI processed about 172 billion transactions, up 46% from 117.64 billion in 2023, with a single-month transaction value peaking at Rs 23.25 lakh crore (National Payments Corporation of India). This is a testament to both infrastructure expansion and behavioural change, with more people turning to digital platforms for everyday transactions.
Encouragingly, a Reserve Bank of India (RBI) report notes that nearly a third of digital payment users now come from rural India, and merchant adoption is rising in smaller towns and villages. However, growth in digital adoption has outpaced growth in digital literacy, creating an ecosystem where access does not necessarily translate into safe or empowered usage—especially for informal workers, rural populations, and women.
The informal sector, which contributes around 45% to India’s GDP (National Accounts Statistics 2022-23) and employs the vast majority of the workforce, need to be carried along the digital revolution. According to the Periodic Labour Force Survey (2023–24), 61% of non-agricultural female workers are employed in informal enterprises and they often lack access to stable digital infrastructure, basic digital tools, and, most importantly, the required financial literacy to use such tools. When placed in the context of India’s dismally low financial literacy rate—just 24% according to the National Centre for Financial Education (NCFE)—their inclusion becomes a structural necessity to equitable growth.
Despite government schemes like e-Shram and PM-SVANidhi aimed at digitising the informal workforce, most workers remain at the periphery of digital participation. A 2023 study by ICRIER revealed that while 69% of micro and small enterprises used digital wallets, less than half had access to digital credit or e-commerce platforms. The primary barriers were not just economic but psychological and institutional: lack of trust in technology, limited awareness, and fear of fraud.In Jaipur, a Centre for Effective Action study of small merchants found that 58% had still not adopted digital payments despite low entry barriers.
For many, the preference for cash was not due to inertia but perceived convenience, concerns about transaction failures, and a lack of institutional support to resolve problems. The findings challenge the assumption that mere digital access equals digital inclusion. Without the skills, confidence, and safeguards to use digital tools meaningfully, digital platforms can disempower as easily as they can empower.
Financial literacy, therefore, emerges as the missing link. According to NCFE, only 27% of Indian men are financially literate. For women, the figure falls to 21%, and among informal and rural workers it is likely even lower. This knowledge gap leaves users vulnerable to rising cyber fraud and predatory digital lending. The Central Payment Fraud Information Registry reported 13.42 lakh UPI-related fraud cases in FY24 involving `1,087 crore—an 85% increase in cases and a nearly 90% jump in the amount defrauded compared to FY23. Victims are often low-income earners with limited understanding of online security or consumer rights.
The proliferation of unregulated digital lending platforms poses another threat. These platforms, often operating outside the purview of financial regulators, target financially uneducated users with exploitative interest rates. Without financial awareness, technology becomes a double-edged sword.
Financially illiterate users also miss out on wealth-building opportunities that digital finance can unlock—from savings and insurance to pensions and investments. As the digital economy opens up sophisticated tools for the middle class and tech-savvy youth, informal workers remain confined to low-yield, cash-based assets, deepening the wealth gap. What emerges is a multi-layered digital inequality: a lack of tools, trust, and knowledge.
India needs a multi-dimensional policy approach to address this. Financial literacy needs to be treated as core infrastructure—at par with roads, electricity, and broadband. Targeted vernacular campaigns need to reach women, youth, and informal workers through community-based platforms. Self-help groups, anganwadi workers, and panchayats can serve as grassroots educators. Schools and vocational institutions should embed financial education into curricula. Digital infrastructure can be made more inclusive through affordable smartphones and applications that work in low-bandwidth settings.
Fintech regulation should be tightened with faster grievance redress and stricter enforcement of RBI guidelines to protect users. Behavioural nudges can also play a role. Linking government benefits to digital literacy milestones, offering micro-insurance for active users, and gamified saving tools can encourage responsible financial behaviour. These aren’t just good practices—they are essential if India wants to avoid replicating old inequalities in new, digital forms.
The road to Viksit Bharat runs through its informal sector. As we imagine a future driven by innovation, we may remember that true empowerment comes not from access alone, but from the ability to use that access with confidence and clarity.