Effect of UPI Adoption on Savings Behaviour of Indian Households: A Difference-in-Differences Analysis

This study investigates the causal effect of Unified Payments Interface (UPI) adoption on household holdings of shares and debentures in India between 2003 and 2019. Using a difference-in-differences regression framework with district-level aggregated data from the National Sample Survey, supplemented by PhonePe transaction volumes, the analysis contrasts high-growth and low-growth UPI adoption districts. The key finding indicates that increased UPI transaction growth between 2018 and 2019 does not translate into statistically significant changes in household investment in shares and debentures (interaction coefficient p > 0.05). Although the regression model explains 44 percent of variation in shareholdings, the study faces critical limitations: aggregation to district level reduces sample size to 696 observations, the absence of household income controls introduces potential omitted-variable bias, and extreme multicollinearity (337 independent variables) inflates standard errors. The analysis finds no conclusive evidence that UPI adoption meaningfully drives household participation in formal securities markets, though the findings warrant cautious interpretation given the data constraints.