Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)’?

The MCQ explicitly lists 'Digital currency will totally replace the physical currency in about two decades' as a proposed consequence of implementing UPI, indicating the claim is part of mainstream discussion/teaching.

A student could treat this as a hypothesis to test by checking historical timeframes for technology-led currency shifts and current UPI adoption trends.

Defines 'digital money' and lists UPI as a modern method that directly transfers funds bank-to-bank without coins/notes, showing the functional mechanism by which cash use can be reduced.

Combine this with data on transaction volumes over time to estimate how quickly cash transactions could decline under sustained UPI growth.

States that digital payments (UPI) have supported financial inclusion and reduced transaction costs, a pattern that facilitates substitution of cash.

Extend by comparing magnitude of reduced transaction costs and inclusion gains to likely rates of cash-to-digital migration nationally.

Notes central banks are promoting their own digital currencies (e-rupee/CBDC) partly because of dwindling paper currency use, linking policy responses to digitalisation trends.

A student could assess whether UPI uptake plus a central-bank digital currency would together accelerate replacement of physical cash within two decades.

Describes demonetisation prompting people to use bank deposits and digital transactions, showing that policy shocks can rapidly change payment behaviour.

Use this as an example to gauge how fast behavioural shifts can occur and whether similar sustained drivers (technology + policy) could produce near-total cash substitution in ~20 years.

States that digital public goods including UPI support financial inclusion, reduce transaction costs, improve access to credit, and can improve investor sentiment and ease of doing business.

A student could reason that improved ease of doing business and investor sentiment are plausible channels by which UPI might make the country more attractive to FDI, so they should check FDI trends after UPI adoption and control for other reforms.

Presents 'FDI inflows will drastically increase' as a listed possible consequence of implementing UPI (in an MCQ), indicating this is a hypothesised effect found in teaching material.

Use this as a formulated hypothesis to test empirically: compare timing of UPI rollout with FDI inflow data and alternative explanations.

Explains that FDI is governed by DPIIT/FEMA rules and reporting requirements and comes through defined routes (automatic/government), showing FDI is shaped by regulatory and policy frameworks beyond payment infrastructure.

A student can infer that even if UPI improves payments, FDI flows also depend on formal FDI policy and approvals—so one should control for policy changes when assessing UPI's effect on FDI.

Notes that the services sector attracted the highest FDI equity inflow and lists major source countries for FDI (Mauritius, Singapore, US).

Since UPI is part of digital/services infrastructure, a student could examine whether services-sector FDI from those source countries rose after UPI, suggesting sector-specific channels.

Gives a formal definition of FDI (e.g., threshold of 10% equity and modes such as subsidiaries/joint ventures), clarifying what counts as FDI.

Use this to ensure the student measures the correct FDI series (equity stakes/subsidiary investment) when testing whether UPI influenced 'FDI inflows' rather than portfolio flows.