While public infrastructure has been crucial for human advancement, the previous generation has faced challenges, highlighting the necessity for a third type called Digital Public Infrastructure (DPI) built on more open and democratic principles. DPI refers to platforms or building blocks such as digital identification systems, payment infrastructure, and data exchange solutions that enable countries to deliver essential services to citizens, promoting digital inclusion and improving lives.
DPIs mediate three crucial flows – people, money, and information. First, the flow of people is facilitated by a digital identification system. Second, facilitating the flow of money via a real-time fast payment system. And third, governing the flow of personal information through a consent-based data-sharing mechanism. This empowers citizens with control over their data, allowing them to truly benefit from DPIs.
These three interconnected components – digital ID, payment infrastructure, and data-sharing – form the foundational tripod for developing an effective and empowering DPI ecosystem within a country. By integrating these open and democratic digital railways, nations can drive digital transformation while ensuring inclusion and putting citizen interests first.
India Stack’s Promise for Economic Integration
India has pioneered a powerful set of digital public infrastructure components collectively known as the ‘India Stack’, comprising three core pillars – digital identification (Aadhaar), unified payments interface (UPI), and data empowerment and protection (consent layers). This transformative digital infrastructure has fundamentally improved lives by providing biometric IDs to undocumented citizens, enabling banking for the unbanked, and giving people control over their data with privacy safeguards.
With Indian society and economy now built around this digital backbone, and India’s massive global diaspora, there are significant opportunities to unlock the country’s economic potential for international markets. As nations pursue economic diversification and navigate the digitization of the global economy, they should closely study the India Stack as a model for effectively unleashing economic possibilities through bilateral partnerships and developing their digital public infrastructure.
For developed economies looking to modernize legacy financial systems, or developing nations building new ones, India offers a world-leading solution that can revolutionize how global economies engage with India as well as with each other. By integrating India’s advanced digital infrastructure, international markets can move beyond just observing the “India opportunity” to achieving deep integration with its economic backbone. Adopting these open digital rails can be transformative for global development and integration.
Beyond Borders: Recognition and Adoption
India’s pioneering digital public infrastructure, especially the Unified Payments Interface (UPI), has not only transformed the country’s financial system but also holds immense potential to influence the global economy. As technological innovations are causing a paradigm shift in global finance and reshaping traditional systems, the India Stack has enabled India to leapfrog the legacy financial and payment infrastructures of developed nations.
Furthermore, with Indians comprising the largest diaspora community worldwide, there is a growing international demand for access to UPI to facilitate easier cross-border transactions like trade, tourism, entrepreneurship, and remittances. Recognizing UPI’s advantages, several countries including Singapore, the United Arab Emirates, Bhutan, Sri Lanka, and France have either adopted or are actively exploring the adoption of this pioneering digital payments technology from India.
The rapid international adoption of UPI underscores how India’s robust and open digital public infrastructure is well-positioned to make a significant global impact. As economies worldwide undertake digital transformations, India’s scalable, interoperable, and inclusive DPI models present an opportunity to reshape international financial systems and integrate markets across borders.
A recent policy guide released jointly by the G20, World Bank, and the G20’s Global Partnership for Financial Inclusion (GPFI) highlights the immense potential of Digital Public Infrastructure (DPI) to drive financial inclusion and catalyze economic gains in developing countries.
By analyzing case studies across Africa, Asia, Europe, and Latin America, the guide underscores the revolutionary impact of interoperable and open DPI systems. It cites India’s pioneering digital infrastructure called ‘IndiaStack’ – featuring Aadhaar digital ID and UPI digital payments platform – as a prime example of how DPIs can transcend financial services to benefit sectors like health, education, and social welfare.
As stated by the G20, Digital Public Infrastructures (DPIs) possess significant potential to accelerate inclusive digital transformation by reducing transaction expenses, fostering innovation, and improving user interactions. However, the guide also emphasizes the importance of robust data protection and risk management frameworks to address potential operational, legal and regulatory challenges associated with DPI implementation.
It recommends authorities adopt global best practices, implement risk-based regulations, and establish strong internal governance mechanisms to maximize the benefits of leveraging DPIs. Comprehensive safeguards are crucial to mitigate risks and ensure DPIs achieve their transformative potential equitably.
Unveiling the Economic Impact and Growth Horizon
As per a World Economic Forum analysis, India›s Digital Public Infrastructure (DPI) has catalyzed a surge of innovations spanning diverse sectors, both public and private. At the core of this transformation is the seamless integration of DPI components like Aadhaar (digital ID), UPI (payments interface), and FASTag (toll payments) into everyday transactions, revolutionizing how consumers interact with financial services and businesses operate.
A significant impact is visible in the retail sector, where local firms have begun leveraging DPI to enhance customer experiences and accelerate payment processes. With UPI, retailers can now receive instant and secure payments via QR codes, eliminating inconvenient cash transactions. This promotes efficiency and provides millions of small retailers access to formal financial services, facilitating financial inclusion and economic empowerment.
The IndiaStack has contributed to financial insertion by providing an accessible and secure platform for digital transactions. This has enabled millions of Indians, including 64% residing in rural areas, to participate in the formal economy.
India›s focus on DPI signals its monumental economic ambitions, targeting an $8 trillion GDP by 2030. However, challenges like connectivity gaps and limited outreach persist, necessitating proactive government involvement. A recent research paper by the Center for Strategic and International Studies (CSIS) suggests that while reliance on government control raises questions about innovation and private-sector involvement, a collective approach can be beneficial.
Private companies possess a deep understanding of consumer needs and market dynamics, while governments prioritize policy solutions for citizens. Combining market insights from the private sector with the government›s policy priorities through collaborative models can leverage financial resources to drive DPI adoption and bridge gaps.
Final Words
Today, India – the world’s largest country by population – has its society and economy structured around its pioneering Digital Public Infrastructure called the India Stack, particularly the transformative Unified Payments Interface (UPI). This has enabled widespread financial inclusion across the country, an essential catalyst for India’s remarkable economic growth story.
As nations worldwide pursue economic diversification opportunities and digital transformation of legacy financial systems, they are keenly looking towards India’s robust and inclusive DPI models.
Jennifer Philip is a Geopolitics and Defence Journalist from Mumbai and currently serving as a Beat Editor at Business Upturn Asia
