Digital Payments, Tourism and Economic Growth in India: An Empirical Analysis of their Interrelationship

Purpose:
Digitalisation has become a crucial aspect of India's economic transformation, with rapid growth in both digital payments and tourism in recent years. However, the relationship among digital payment activities, tourism, and economic growth remains underexplored at the national level. This study aims to examine the connections among UPI transactions, domestic and foreign tourist visits, and India's GDP to understand how these elements have evolved together over the study period.

Methods:
The study utilises annual macro-level data on UPI transaction volume and value, domestic and foreign tourist visits, and GDP. Correlation and regression analysis are employed to assess the strength and statistical significance of the relationships between these variables and economic growth. UPI transaction activity serves as a measurable indicator of the expansion of India's digital payment ecosystem.

Results:
The findings reveal strong positive correlations between UPI activity and GDP. The value of UPI transactions displays the strongest relationship, with an R² of 0.998 and a statistically significant p-value of less than 0.001, while transaction volume has an R² of 0.994. Domestic tourist visits also show a strong association with GDP (R² = 0.960, p = 0.003). There is a positive and statistically significant relationship with foreign tourist visits, although this association is comparatively weaker (R² = 0.745, p = 0.032). Overall, the results indicate that the growth of digital payments and tourism closely aligns with India's economic growth during the examined period.

Conclusion:
This study suggests that digital payments and tourism are closely intertwined with India's broader economic development. However, the findings should be interpreted as evidence of association rather than causation, as the analysis is based on a limited number of annual observations and the variables exhibit strong upward trends over time. The study emphasises the necessity for continued investment in digital payment infrastructure, cybersecurity, digital literacy, and tourism facilities, particularly in less developed regions. Future research utilising longer and more frequent datasets, along with advanced econometric techniques, would provide a more robust understanding of the direction and persistence of these relationships.

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