NEW YORK, December 30, 2025, 10:08 ET
- Cigarette and tobacco outlets logged the fastest jump in UPI transaction volumes over the past two years, a Moneycontrol analysis reported.
- A former senior finance official warned UPI’s growth is cooling as cash use rebounds in parts of the economy.
- The split underscores how India’s digital payments surge is increasingly driven by small-ticket spending, even as cash persists in property, agriculture and rural retail.
Cigarette and tobacco kiosks have become one of the fastest-growing merchant categories on India’s Unified Payments Interface, with transaction volumes rising more than eightfold between November 2023 and November 2025, a Moneycontrol analysis reported.
The shift matters because India’s digital payments push is increasingly leaning on everyday, low-value purchases to keep UPI growth humming, even as cash remains entrenched in parts of the economy where digital adoption is harder and tax compliance is looser.
Subhash Chandra Garg, a former finance and economic affairs secretary, wrote in a Deccan Herald column on Tuesday that UPI’s expansion has started to lose steam while cash use shows signs of rebounding. “UPI, the star performer, seems to have peaked,” he wrote. 1
Moneycontrol said consumption-category data show UPI transaction volumes across tracked merchant segments nearly doubled from 6.6 billion in November 2023 to 12.8 billion in November 2025.
Grocery payments rose from 1.27 billion to 3.22 billion transactions over the same period, lifting their share of the tracked UPI mix to 25.1% from 19.2%, the report said.
Cigarette and cigar shops stood out within that broader shift. Their share of tracked UPI transactions jumped to 2.76% in November 2025 from 0.66% two years earlier, with usage accelerating from September 2024 and then stabilising in the 2%–2.7% range, Moneycontrol reported. 2
As UPI moved deeper into micro-purchases, ticket sizes fell. The average UPI transaction value at cigarette outlets dropped to about 60 rupees in November 2025 from around 81 rupees in November 2023, far below the overall UPI average of roughly 595 to 650 rupees over the same period, Moneycontrol said.
Other small-ticket categories such as beer and liquor shops, confectionery retailers, barber salons and clothing outlets have also gained UPI share in recent months, the report said.
Garg argued the broader UPI story has shifted from breakneck expansion to a slower grind. He cited a steady downshift in annual UPI growth rates over the past few years, alongside a flattening in monthly transaction volumes.
In his account, monthly UPI transactions have hovered around 20 billion for several months, after rising from 18.3 billion in March to 20.7 billion in October, a pattern he said points to further moderation in 2025-26.
UPI’s rise has also squeezed older payment rails. Garg said cheque and other paper-based payments and debit-card use have fallen sharply over recent years as consumers and merchants migrated to QR code-based UPI payments in cities and towns.
Cash, however, has not been displaced in key segments. Garg said property deals, parts of agriculture, informal businesses and rural retail still rely heavily on banknotes, and he pointed to faster growth in currency in circulation — the amount of cash outstanding — as a proxy for rising cash usage.
