06 January 2026: MAINS CURRENT AFFAIRS

MAINS Current Affairs includes The Indian Payment Paradox & Privatisation threatening India’s public health system

ECONOMY

1. The Indian Payment Paradox

Introduction

The Indian economy is witnessing a unique transition. While the world looks to India as a leader in Digital Public Infrastructure (DPI), the domestic reality is a complex interplay between the “UPI revolution,” the persistence of a “shadow cash economy,” and the “disruptive potential of stablecoins.”

About The Indian Payment Paradox

India blends world-leading digital infrastructure like UPI with a persistent, massive reliance on cash, creating a paradox where cutting-edge fintech innovation and traditional physical currency usage coexist in the economy.

The Digital Trajectory: From Hyper-growth to Saturation

The Unified Payments Interface (UPI) has been the “warhorse” of India’s digital journey, but data indicates it is entering a mature, slower phase.

Massive Volume Gains:
- Transactions rose from ~43 billion in FY21 to over 221 billion in FY25. This reflects a successful shift in consumer behavior toward “frictionless” payments.
The Moderation Trend:
- The growth rate of UPI volumes has seen a steady decline: from 105% (FY22) to 82% (FY23), 56% (FY24), and finally 41% (FY25).
Plateauing Numbers:
- Recent 2025 data shows monthly transactions are hovering around the 20 billion mark. This suggests that “urban saturation” has been reached.
Displacement of Traditional Modes:
- Digital growth has directly cannibalized traditional banking. Debit card usage plummeted from 4 billion transactions (FY21) to 1.6 billion (FY25), as UPI replaced cards for small retail payments.

Why Cash Remains “King”: The Four Structural Pillars

Despite the digital push, Currency in Circulation (CIC) growth reversed its downward trend in 2024-25, reaching an 8.58% annual growth by October 2025. This resilience is driven by four specific sectors:

Real Estate & The Tax Gap:
- The secondary property market remains heavily cash-reliant. To avoid high Stamp Duty and Capital Gains Tax, buyers and sellers often under-report the transaction value, paying the “black” component in cash.
The Agricultural Supply Chain:
- Agriculture in India is not yet fully digitized at the grassroots. Farmers often prefer cash to maintain liquidity and to settle informal debts with local “Arhtiyas” (middlemen) who provide credit during the sowing season.
The Unorganized/Informal Sector:
- A significant portion of India’s MSMEs operate outside the formal tax net. Dealing in cash allows these businesses to avoid the compliance costs and tax liabilities associated with the Goods and Services Tax (GST).
Rural Connectivity & Trust:
- In deep rural pockets, digital infrastructure remains patchy. Small vendors prefer cash because it offers “instant finality” of payment without the risk of server failures or internet issues.

The Crypto-Stablecoin Challenge

Stablecoins (cryptocurrencies pegged to the US Dollar) are emerging as a shadow infrastructure for international finance.

Replacement of Hawala:
- Stablecoin networks are increasingly used by the Indian diaspora for remittances and by residents for international travel and education. They are faster and cheaper than traditional banking channels.
The RBI’s Hardline Stance:
- The RBI views stablecoins as a threat to monetary sovereignty and financial stability. Unlike the US or China, India has not yet legalized or licensed private stablecoin issuers.
Regulatory Blindspot:
- The RBI’s “disdain” for these assets may lead to a loss of oversight. As transactions migrate to these networks, official remittance data through the Liberalised Remittance Scheme (LRS) may become understated.

Way Forward

To move beyond the current plateau, India needs structural reforms rather than just technological ones:

Fiscal Reform in Real Estate:
- Reducing stamp duty and capital gains tax could significantly reduce the incentive for cash transactions in land deals.
GST Incentives for Small Vendors:
- Policymakers should consider a “GST Credit” for small retailers that balances the tax burden, making digital formalization more attractive than cash-based informality.
Regulating, Not Just Banning:
- India should consider a proactive framework for Rupee-backed stablecoins. This would bring international transfers into a regulated “light” and compete with US Dollar-backed private tokens.
Deepening e-Rupee (CBDC):
- The RBI needs to accelerate the adoption of the Central Bank Digital Currency (CBDC) to provide a digital alternative that has the “anonymity” and “finality” of cash.

Conclusion

The dream of a cashless society remains distant because cash continues to serve specific economic functions, particularly in the informal and black economy.
The next phase of India’s financial evolution requires moving beyond technological adoption to addressing difficult structural tax and regulatory reforms.

Health

2. Privatisation threatening India’s public health system

Context: India’s public health system is under renewed scrutiny due to rising privatisation, chronic underfunding, and regulatory gaps, which are worsening health inequities and patient outcomes.

About Privatisation threatening India’s public health system :

What it is?

Privatisation in public health refers to the growing role of private hospitals, insurers, and corporate entities in financing, delivering, and training healthcare, often using public funds.
It includes public–private partnerships, insurance-based purchasing of care, and expansion of private medical education.

Trends:

India spends only ~2.1% of GDP on public health (2023–24), among the lowest globally.
Over 60% of total health expenditure is out-of-pocket, pushing millions into poverty annually.
Schemes like Ayushman Bharat PM-JAY increasingly reimburse private hospitals, diverting public funds.
Private medical colleges charge ₹40–50 lakh+ for MBBS, reshaping medical priorities toward profit recovery.

Need for Privatisation in Public Health

Bridging tertiary care infrastructure gaps: Private hospitals supplement shortages in ICUs, cardiology, oncology, and renal care where public capacity is inadequate.
- g. In Uttar Pradesh, district dialysis services are delivered through private hospitals empanelled under PPP models due to lack of public renal units.
Expanding access to advanced diagnostics: The private sector provides nearly 70% of high-end diagnostics (MRI, CT), which public hospitals cannot rapidly scale.
- g. Tier-2 cities rely predominantly on private diagnostic chains for cancer and neuro-imaging.
Driving technology adoption and innovation: Corporate hospitals act as early adopters of advanced medical technologies before public diffusion.
- g. Apollo Hospitals pioneered robotic surgeries and AI-based cardiac risk tools, later informing national clinical benchmarks.
Rapid surge capacity during health emergencies: Private healthcare can quickly mobilise infrastructure and manpower during crises.
- g. During COVID-19, private laboratories conducted ~45% of India’s RT-PCR tests, preventing systemic collapse.

Initiatives taken by the government

Ayushman Bharat programme

- PM-JAY for secondary/tertiary care insurance.
- Health and Wellness Centres for primary care strengthening.

National Health Policy 2017

- Target of 2.5% GDP public health spending (yet to be achieved).

Digital health push

- Ayushman Bharat Digital Mission for health records and interoperability.

Medical education expansion

- Increase in government medical colleges and seats post-2014.

Challenges Associated with Privatisation:

Profit-driven clinical decision-making: Revenue targets incentivise unnecessary procedures and overtreatment.
- g. Multiple state audits flagged unwarranted C-sections and hysterectomies in private hospitals.
Weak and uneven regulatory enforcement: Price caps and quality standards vary widely across States.
- g. The same cardiac stent procedure shows 3–5x price variation across private hospitals.
Erosion of public health infrastructure: Public funds flow to private reimbursements instead of strengthening government facilities.
- g. PM-JAY reimbursements often bypass underfunded district hospitals.
Commercialisation of medical education: High fees distort career choices away from public service and primary care.
- g. Private MBBS seats costing ₹40 lakh–₹1 crore push doctors toward high-paying urban specialisations.

Way Ahead:

Rebuild public health as the primary provider: Increase public health spending to at least 3% of GDP with priority to government facilities.
- g. Countries with strong public systems (UK, Thailand) show lower OOPE.
Strengthen primary care first: Treat most illnesses locally to reduce dependence on expensive tertiary care.
- g. Ayushman Arogya Mandirs can address 80–90% of disease burden if fully staffed.
Tighten regulation of private providers: Enforce Standard Treatment Guidelines, audits, and transparent pricing.
Reorient insurance schemes toward public hospitals: Use PM-JAY funds to upgrade government infrastructure instead of passive purchasing.
Reform medical education and workforce policy: Cap fees, mandate rural service, and prioritise skill-based clinical training.

Conclusion:

Privatisation can only be a supporting instrument, not the foundation of public health. Unchecked market logic deepens inequality and weakens state capacity. India’s health future depends on a strong public system with a tightly regulated private complement.