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We are having Office 365 plan E3 with SharePoint Online Plan2. I am trying to avoid using SQL Server as it is hosted in Cloud. There will not be any access to SQL Server or Database. But I have a scenario where I need to display the Cascading Drop downs drived from Database and display the result. For this, I am planning to create an XML file as database and copy that file to the server. Please suggest me a nice to way to achieve this.

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If you can adjust the user interface, I would suggest using a Term Set instead. You can then nest the entries in the Term Set to reflect the cascade rules. The user can then update only one control instead of several, and can search across all terms in all levels.

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