Prospects and Challenges of Introducing Digital Currency in Indian Economy

With the growing use of digital payments, governments all over the world are exploring the idea of government backed digital currencies, which can provide safer transactions. Countries like Malaysia, Nigeria, Singapore and China have introduced their own Digital Currencies. The Government of India in its “Union Budget 2022” has proposed to introduce “Digital Currency” controlled by Reserve Bank of India in the Financial Year 2022-23. In order to reap the benefits of growing economy and achieve financial inclusion, India, has been striving to digitize its economy. The demonetization of higher denomination currency notes in the year 2016 and the Covid-19 pandemic has further fuelled the need of digital payments in the country and the government responded to this need by announcing the launch of Central Bank Digital Currency (CBDC) in the Budget 2022 using Blockchain Technology. Being an explorative study, the objective of the paper has been to study the advantages, prospects risks and challenges of launching digital currency in India. Further, the article briefly delves into the evolution and growth, regulatory aspects, market operations of digital currencies globally.