India’s Digital Infrastructure Drive: Finance Sector Poised for Tech-Fuelled Boost
India is emerging as a leader in establishing a robust digital public infrastructure (DPI) ecosystem not just domestically, but globally. It has already earned a reputation for being a game-changer in India’s goal of achieving financial inclusion of citizens. Now, India is concentrating more energy towards propelling the financial sector, and digital infrastructure will play a crucial role in the country achieving greater success on this front.
The success that India is registering on the digital front today can be traced back to 2015 when Prime Minister Narendra Modi unveiled the Digital India initiative. That was certainly not the government shooting in the dark. It knew what was to be done, and every step taken since has been to make India a leader in the digital world.
On December 19, the Centre approved the project for computerising 63,000 functional Primary Agricultural Credit Societies (PACS) with a total financial outlay of Rs 2,516 crore. PACS are community-run financial institutions that grant loans, mostly to rural and agricultural borrowers. India is home to around 100,000 such organisations.
The ambitious project entails bringing all the functional PACS onto an Enterprise Resource Planning-based common national software. Additionally, these credit societies will also be linked with the National Bank for Agriculture and Rural Development (NABARD) through State Cooperative Banks and District Central Cooperative Banks. This will give a significant boost to the creation of robust digital infrastructure that directly benefits rural India.
This project would improve governance and transparency in PACS, thereby leading to speedy disbursal of loans, lowering of transaction costs, reduction in imbalances in payments, and seamless accounting with state and district-level cooperative banks, while also increasing efficiency.
Farmers stand to gain big, as the implementation of a Common Accounting System (CAS) and Management Information System (MIS) will improve access to short-term, medium-term and long-term credit.
Meanwhile, the Reserve Bank of India on December 8 announced that the central bank would be establishing a cloud facility for India’s financial sector in order to enhance data security. Today, financial institutions, especially banks, make use of extensive data, the volume of which is only increasing. To handle this rise in data volume, banks and financial entities resort to using the services of various public and private cloud facilities. Therefore, establishing a single cloud facility for the entire Indian financial sector would enhance the security, integrity and privacy of such data. The RBI also anticipates the move to facilitate scalability and business continuity in the country.
Earlier, in October, a project for the development of a common platform for 1,851 Agriculture and Rural Development Banks (ARDBs) was launched. Under the project, the Centre has also approved the project of computerisation of 1,851 ARDB units, including their branches and supervisory units, with a total outlay of Rs 119.40 crore.
India has made a timely digital infrastructure push and continues to build on the work done over the past eight years. Today, the world exists on both the physical and digital planes. We know for a fact that physical infrastructure development is crucial to countries’ development and economic expansion. India is expanding its physical infrastructure at an unprecedented scale for the same reason. However, digital infrastructure is as much important to a nation’s growth.
Aadhaar, bank accounts for all Indians, data exchange (account aggregators and DigiLocker) and the United Payments Interface (UPI) have today become a cornerstone of India’s digital public infrastructure, and are known together as the ‘India Stack’.
Success of ‘India Stack’: What the World Can Learn from India’s DPI Journey
India’s Digital Public Infrastructure push has the potential to usher in a global revolution. Today, the world is in awe of what the ‘India Stack’ has been able to achieve in less than a decade. Consider this: A World Bank report from September 2023 has hailed the success of India’s DPI to enhance financial inclusion and delivery of public goods and services. As a result of the Modi government’s DPI push, the World Bank claims India has achieved a “remarkable” 80 per cent financial inclusion rate. The report said, “The India Stack exemplifies this approach, combining digital ID, interoperable payments, a digital credentials ledger, and account aggregation. In just six years, it has achieved a remarkable 80% financial inclusion rate — a feat that would have taken nearly five decades without DPI.” That definitely puts India’s achievement in perspective. The rapidity with which DPI is able to deliver results is the reason why there is so much international appreciation and interest for the ‘India Model’.
The World Bank also cited India’s Data Empowerment and Protection Architecture (DEPA) and Account Aggregator (AA) Framework to drive home the point that the international community has much to learn from India. Referring to the enormous popularity of UPI, the report added that in some countries, such as India, the adoption of fast payment systems has been “particularly quick and transformative”.
The International Monetary Fund (IMF), earlier in 2023, went on to proclaim that India has developed a “world-class” digital public infrastructure (DPI) to support its sustainable development goals. The IMF’s working paper, titled ‘Stacking up the Benefits: Lessons from India’s Digital Journey’ highlighted several of the country’s DPI successes. For example, it said that by using DPI, India was able to mitigate suffering during the Covid-19 pandemic and provide quick support to poor households. The IMF observed that a robust digital infrastructure helped India scale its vaccine delivery quickly and overcome challenges such as large-scale internal migration. It also hailed the Pradhan Mantri Jan Dhan Yojana (PMJDY), which has today led to over 80 per cent of adults in India having a bank account.
Recognising the potential of India’s DPI model, and knowing that it can have a transformative impact globally, the government has been working to share the ‘India Stack’ with a host of countries. India’s G20 Presidency over the last one year was instrumental in showcasing the country’s DPI potential to the world, especially to countries in the Global South. As India looks at a larger role for itself on the global stage, sharing its digital infrastructure model with the developing and underdeveloped world is a high-priority mission of the Modi government.
Eight countries have already signed Memoranda of Understanding (MoUs) with India for the stack. Several others, especially African nations, have shown a keen interest in adopting the payments and healthcare systems. Rajeev Chandrasekhar, Union Minister of State for Electronics & IT, went a step further and revealed that international interest in India’s DPI is such that the country can sign deals with 30 more countries.
Importantly, it is not just the developing world that is showing a keen interest in the ‘India Stack’. In fact, countries like France and Germany are also in awe of what India has achieved over the past eight-odd years.
In order to make India’s DPI readily available for countries that seek to emulate it, the Centre is also going to build and maintain a Global Digital Public Infrastructure Repository (GDPIR), a virtual repository of DPI, for the use of other G20 members and beyond.
India’s digital infrastructure expertise can become a force for global good, and the world realises this. The success of ‘India Stack’ is not an ordinary story. It is one which is having a transformative impact on the Indian economy. As the focus now turns to accelerating the growth of the financial sector using DPI, India is poised to become a pioneer in a critical front that many countries are yet to start earnest work on.
Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect News18’s views.
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