Opinion
Leveraging DPI for inclusive, sustainable growth in G20 nations and beyond
Summary
- India should continue to take initiatives to spread and unlock the potential of digital public infrastructure, and lead in highlighting the positive impacts of DPI across sectors and economies
With the help of Aadhaar, low-cost mobile data, and the government’s mission-mode financial inclusion programme, Jan Dhan Yojana, India has achieved a significant milestone in creating more than 500 million new low-cost bank accounts, of which about 56% are for women. The world has witnessed and recognised India’s achievements in utilising digital infrastructure to achieve higher efficiency in public and private service deliveries and solve societal problems. According to a study by the Bank of International Settlements, the percentage of Indians with bank accounts grew from around 20% in 2008 to 80% in less than a decade–a feat that would have taken five decades without such digital infrastructures.
India’s verifiable digital identity, Aadhaar; its fast payment system, the Unified Payment Interface (UPI); and its consent-based data sharing platforms are commonly known as India Stack. This year, these have been key components of the common understanding of digital public infrastructure (DPI) that G20 members have agreed upon for the first time, under the G20 India presidency.
India’s homegrown digital payments system has facilitated the rapid growth of digital payments over the last few years. It is now used by 300 million individuals and 50 million merchants, and 40% of all payments in India are conducted digitally. Over 11 billion transactions worth Rs17.16 lakh crore took place via UPI in October alone. Aadhaar-enabled Direct Benefits Transfer (DBT) has resulted in more than $27 billion in cumulative savings for Central government schemes. According to an IMF study, banks that use Aadhaar-enabled e-KYC lowered their cost of compliance from Rs1,000 ($12) to Rs5 (6 cents).
While there is keen interest in India’s DPI approaches, there are concerns about the potential risks of using excessive application of digital technologies. In this regard, it may be noted that the uniqueness of India’s DPI approach is that the design of DPI is such that the techno-legal aspects are embedded within it so that the risks are addressed automatically.
Achievements in G20
These achievements are extraordinary, and they have enabled India–guided by its people-centric, decisive, action-oriented, and inclusive approaches–to pursue an ambitious DPI agenda under its G20 presidency. During its presidency year, India displayed its achievements in DPI fields through workshops and exhibitions for G20 and global south countries, which generated tremendous narratives about India’s DPIs.
The G20 global partnership for financial inclusion (GPFI) of the finance track under the Indian presidency developed G20 policy recommendations endorsed by the G20 leaders. It emphasised the significant role of DPI in achieving financial inclusion that leads to strong, inclusive, balanced, and sustainable growth. The Financial Inclusion Action Plan (FIAP) 2023 for the next three years, which has also been endorsed under India’s presidency, focuses on actionable deliverables for technological innovations, including DPI. It also emphasises deeper engagement with non-G20 countries. Considering India’s expertise and achievements in digital financial inclusion, the responsibility of being one of the co-chairs of the GPFI also has been entrusted to India for the next three years.
Way Ahead
Despite contributing a significantly larger share of employment worldwide, micro, small and medium enterprises (MSMEs) still face a huge finance gap of $5 trillion per annum globally. Through its Account Aggregator (AA) framework, India has developed a unique model to make credit easily available to individuals and MSMEs. This DPI, coupled with innovative solutions such as the Open Credit Enablement Network (OCEN), has emerged as a catalyst for change. These solutions facilitate responsible data-sharing, reduce bottlenecks in credit provision, and make cash flow-based lending available to MSMEs with greater ease. This will accelerate our journey toward achieving a $5 trillion economy. Hence, efforts must be made to scale up the AA model significantly.
DPIs can be deployed across multiple sectors, including health, education, judiciary, and agriculture, to achieve higher efficiencies. Efforts towards cross-border linkages of DPIs to reduce costs of payments, including that of remittances, to below 3% should also continue. DPIs can facilitate our journey towards achieving sustainable development goals by digitally advancing financial inclusion. This is because financial inclusion is considered an enabler for seven of the 17 SDGs. Also, there is a need to participate effectively in the G20 forum under the G20 Brazil presidency to continue DPI-related significant achievements made under the G20 India presidency.
India should continue to take initiatives to spread and unlock the potential of DPIs, and lead in highlighting the positive impacts of DPIs across sectors and economies by participating actively in all relevant fora, and actively engaging with relevant international organisations and bilaterally with G20 and global south countries to share its knowledge in the field. We have already engaged with some interested countries, which we may strengthen and extend further. We should use the proposed Centre of Excellence for Global South to deepen our engagement with the rest of the world on DPI, among other things.
V Anantha Nageswaran is Chief Economic Adviser, and Chanchal C. Sarkar is Economic Adviser in the Department of Economic Affairs, Ministry of Finance. The views expressed above are personal.
