G20 Summit: India takes its Digital Public Infrastructure success to the world

This was the first time when a multilateral grouping recognised the importance of DPI and sought to define it and constructed principles and conditions for its development and deployment.

Digital Public Infrastructure (DPI) has created quite a storm in the recent G20 meetings. For years, India’s soft power was confined to cricket, Bollywood, Yoga and Ayurveda. It now seems that there has been a powerful addition to this list. The Finance Minister, Nirmala Sitharaman even mentioned that the inclusion of DPI into the G20 Financial Inclusion Action Plan was the defining legacy of India’s presidency of the G20.

Though a common definition of DPI was lacking, the initial meetings did help in formulating one, which is long and convoluted and best ignored for the time-being (found here). Invoking the popular metaphor used in all descriptions, DPI is akin to digital roads or rails upon which digital products and services can be built to benefit entire populations.

For our purpose, it will suffice to think of DPI as digital infrastructure to deliver public services. In India, this has three foundational layers – identity systems (like Aadhaar), payments (like UPI), and data exchanges.

This was the first time when a multilateral grouping recognised the importance of DPI and sought to define it and constructed principles and conditions for its development and deployment. The G20 New Delhi Leaders Declaration agreed on developing a G20 Framework for Systems of DPI. They further welcomed “India’s plan to build and maintain a Global Digital Public Infrastructure Repository (GDPIR)”, a virtual repository of DPI for use by other G20 members and beyond. Finally, India’s proposal of the One Future Alliance (OFA), a voluntary initiative aimed to build capacity, and provide technical assistance and adequate funding support for implementing DPI in Low- and Middle-Income Countries (LMICs hereon) was noted.

Pandemic-Induced Growth

The potential benefit of DPIs came to the fore during the pandemic when public health systems collapsed and social security nets couldn’t cope. In fact, countries which had made some investment in DPI were able to respond more effectively.

For instance, Taiwan, South Korea, Togo and Sri Lanka and India used DPIs for contact tracing, maintaining reliable public data repositories, reporting, analysing and disseminating health data, for vaccine delivery and for delivering targeted benefits. Since then, a lot more countries (49) have started rolling out Digital IDs.

India As A Case-Study For DPI

DPI is built using open-source and modular technologies that enable “interoperability”, which enables the information exchange between different branches of the public and private sector. This helps in vastly improving the speed and scale of service delivery. India provides a useful case study of this potential. The economic survey of 2023 suggested that India’s DPI can add around 60-100 basis points to the country’s potential GDP growth rate.

One such service enabled by the interaction of open APIs and digital ID systems is the e-KYC or remote authentication services. This enables banks and financial services to authenticate a person’s identity remotely instead of in-person verification. A G20 report by the World Bank notes that this ecosystem helped some NBFCs in India achieve an “8 percent higher conversion rate in SME lending, a 65 percent savings in depreciation costs, and a 66 percent reduction in costs related to fraud detection”. Further, banks’ costs of onboarding customers in India decreased from US$23 to $0.1 with the use of DPI.

Account ownership also increased from 25 percent of adults in 2008 to nearly 80 percent in one decade. This would have otherwise taken 43 years, according to the World Bank. Even if a portion of these is dormant, the uptick is impressive. Moreover, since 2017, India has been improving financial inclusion at a compound annual growth rate of over 5 percent, a significant expansion of India’s formal financial system.

The enormous value of UPI and its growing importance is rather well documented – eight billion UPI transactions, worth nearly $200 billion, were carried out involving 300 million people and 50 million merchants in January 2023 alone. It was estimated to have resulted in savings of US $12.6 billion in 2021.

DPI has also been used for direct benefits transfer in India and other countries. Both the number of beneficiaries in India and the volume of welfare transfers have considerably increased in the last decade.

Other Benefits Of DPI

India has shown that countries can benefit from DPI through greater financial inclusion, lower transaction costs, increased economic activity and better quality of welfare spending. Beyond that, there are other use cases.

An UNDP report estimates that by 2030, “investment in the three prioritised pathways of open credit, digital retail payments, and penetration of G2P systems can grow LMICs’ economies by 1-2 percent of GDP”.  Further, Digital ID alone can unlock economic value equivalent to 3–13 percent of GDP, with an average 6 percent improvement for emerging economies.

The report suggests that an open-source DPI can bridge nearly 50 percent of the credit gap for MSMEs, easing credit access for 16–19 million additional MSMEs in low- and-middle-income countries (LMICs) in 2030.

In Estonia, it is estimated that X-Road (a DPI that facilitates the provision of almost all government services digitally) saves Estonians an estimated 820 years of working time every year and approximately 2 percent of GDP.

One of the biggest possible potential benefits can be in the integration of global payments systems. As this article notes, by early 2023, UPI was connected with Singapore’s PayNow system and also with the United Arab Emirates, through Mashreq Bank’s NEOPAY system. Nepal and Bhutan have been using UPI since 2022. There was talk about potentially deploying UPI in France as well. If not UPI, countries could develop Central Bank Digital Currency for cross-border payments without using the current cumbersome and expensive SWIFT system.

A Final Note Of Caution

There have been G20 leaders’ declarations in the past that have aimed for the moon, but little has come through later. To use a cliché, much depends on the follow-through and execution. New Delhi has done well so far in conducting multiple bilateral and multilateral negotiations to get everyone on the common footing.

Global DPI should be more than just tech transfer. That is the easy part. A poorly developed DPI can lead to “data breaches and privacy violations, improper and unlimited access to personal data, violation of intellectual property rights and security risks.”

Building the high quality governance structures that have inbuilt mechanisms to ensure privacy, inclusivity, accountability, and openness is of paramount importance.

Anupam Manur is a Professor of Economics at the Takshashila Institution, an independent think tank and school of public policy. Views are personal, and do not represent the stand of this publication.