After the advent of IMPS & UPI, the volume of digital transactions has significantly increased in the country and continues to grow. However, the pandemic-induced lockdowns and changing spending patterns seem to have had an impact on digital transactions. Both the volume & value of digital transactions are significantly affected by lockdown measures, as per the latest available government data. People’s spending patterns have changed during the COVID-19 pandemic. Globally, there has been an increase in household saving rate during the second quarter of 2020 following the pandemic’s vicious toll on economies. Not just that, the pandemic has had a major impact on consumption levels and inequality within India. According to a recent study, the bottom 40% of households had experienced the most severe decline in consumption in the early phase of the pandemic. However, with time, as COVID-19 intensified, consumption declined across all classes of households, especially the middle class. That is, the impact of the pandemic was severe both for the middle class as well as the poor. What has been the impact of Lockdown measures? In one of our earlier stories based on RBI’s annual report, it was observed currency in circulation has more than doubled in the last five years despite an increase in digital transactions. According to RBI, in the year 2020-21, a higher-than-average increase in banknotes in circulation was observed due to precautionary holding of cash by the public because of the pandemic and its prolonged continuance. Restricted mobility due to lockdowns and the need to reduce physical contact to avoid infection could have encouraged more people into resorting to online platforms for financial transactions instead of cash. At the same time, severe lockdowns may have had an impact on digital transactions as most businesses except the essential ones were completely shut down. In other words, the lockdown measures while pushing people to hoard more cash also may have impacted digital transactions. We analyse the data on various types of digital transactions to understand if the volume of transactions has grown or shrunk during the lockdown months. Even prior to that, the BJP led NDA government launched the Digital India campaign in July 2015 with the motive, ‘Faceless, Paperless, Cashless’. The promotion of cashless transactions and conversion of India into a less-cash society was an important goal of the program. In fact, one of the objectives of the demonetization exercise in November 2016 was to build a less-cash society and encourage people to use digital platforms. The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money.” AePS, BHIM UPI, Credit and Debit Cards, IMPS, Internet Banking, Mobile Banking, NACH, NEFT, NETC, PPI, and RTGS are some of the popularly used modes of digital transactions in India. Digital transactions have increased significantly over the last few years There has been a substantial increase in the volume of digital transactions over the last few years. Data from the Digidhan dashboard developed by the Ministry of Electronics & Information Technology (MEITY) and a Rajya Sabha response from March 2021 shows that the total volume of digital transactions has increased from 1004 crores in 2016-17 to 5554.2 crores in 2020-21, registering a more than five-fold increase in five years. The volume is further expected to grow in 2021-22 if the trend holds. As of 15 June 2021, the total volume of transactions for about 2 and half months in 2021-22 has crossed 1160 crores. At this rate, it might just surpass the volume of transactions in 2020-21. The volume doubled between 2016-17 & 2017-18 which could be because of the demonetization, announced in late 2016. Volume of transactions fell in April and May of both 2020 & 2021 It was during March 2020 that states started imposing lockdowns for curbing the first wave of COVID-19. The central government’s strict lockdown began on 25 March 2020 and continued till May 2020 following which relaxation of restrictions began. Similarly, in 2021, most state governments announced lockdowns in the months of April and May for controlling the more infectious second wave. The impact of these lockdown measures is clearly visible on the volume of digital transactions.