Opinion
India’s digital public infrastructure: A catalyst for innovation and competition
Summary
- Far from monopolizing markets, the open-access platforms of DPI have helped level the playing field for small firms and helped new ideas flourish. An example is Namma Yatri, a ride service that operates on ONDC and has taken on incumbents.
Some scholars and practitioners have argued that digital public infrastructure (DPI) could lead to monopolization and stifle private innovation by creating large government-controlled platforms that overshadow private players.
However, India’s experience with DPI tells a different story—one of innovation, competition and inclusivity. By providing open-access platforms that are accessible to all, DPI empowers consumers, retailers, startups and entrepreneurs, levelling the playing field and fostering competition.
Far from monopolizing the market, DPI allows smaller players to thrive, creating opportunities for innovation across industries.
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Before DPI, markets were dominated by large incumbents that controlled access to digital services, excluding smaller players. The Unified Payments Interface (UPI) disrupted this by democratizing digital payments, reducing transaction costs and allowing small businesses to compete on an equal footing with large firms.
This has empowered entrepreneurs to access broader markets and given consumers more choice, reducing dependence on large fintech firms.
In The Entrepreneurial State, Mariana Mazzucato emphasizes that the state can drive innovation by creating new markets, not just correcting market failures. Mazzucato notes how state investments in technology have historically driven major innovations.
For instance, the US Defense Advanced Research Projects Agency commercialized the modern internet. In India, DPI initiatives like UPI and Aadhaar are examples of the state taking a lead in technological development, enabling private-sector growth and innovation.
By investing in DPI, the state not only drives innovation but also ensures digital-economy resilience. When a major private payment aggregator collapsed, UPI’s robust infrastructure prevented disruptions, illustrating Mazzucato’s point that public investment is critical for long-term technological stability and market growth.
An example of how DPI enables market innovation is Namma Yatri, an open-source mobility aggregator that operates using the open protocol of the Open Network for Digital Commerce (ONDC).
Namma Yatri introduced an affordable unlimited daily subscription plan that empowers drivers to operate without being burdened by the high commissions charged by traditional cab aggregators. This helped build a fair and transparent pricing model that benefits both drivers and consumers.
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Namma Yatri’s subscription plan demonstrates how open-access DPI encourages competition and drives incumbents to follow suit.
Incumbent aggregators like Ola and Uber, which earlier controlled the market with high commission fees, are being challenged by this new subscription model, thus creating a more competitive landscape and pushing larger players to provide better prices and services.
By empowering smaller initiatives like Namma Yatri to innovate and compete, DPI levels the playing field for all participants. This is precisely what DPI is designed to do—broaden access to innovation, allow small businesses to thrive and create market conditions where competition drives better outcomes for businesses and consumers.
DPI’s ability to foster competition and innovation is particularly significant in a country like India, which has one of the world’s largest working-age populations, much of it marginalized or underserved.
By providing foundational infrastructure, DPI enables businesses to experiment and innovate, driving growth and creating opportunities for entrepreneurs across sectors.
Just as BSNL ensures connectivity in remote areas where private providers have little incentive, DPI initiatives like UPI and ONDC act as essential infrastructure, enabling even street vendors to accept digital payments, reach customers online and compete with larger incumbents.
Without Aadhaar-based e-KYC, it would have taken India 50 years to reach 500 million bank accounts. Technology allows India to leapfrog traditional systems and quickly implement innovations that serve the current market while preparing the economy for future challenges.
Traditional public infrastructure like BSNL’s telecom network and DPI projects like UPI, ONDC and Bhashini provide essential access and draw more people and businesses into the digital ecosystem. DPI also expands India’s Total Addressable Market to the benefit of all participants.
The state’s role in building DPI reflects a proactive policy approach that seeks to encourage investment in high-risk, high-reward innovation. This way, the state creates the conditions necessary for private sector growth and technological advancement.
Just as the US government’s investments in technology laid the ground for Silicon Valley, India’s investment in DPI has laid the foundation for a vibrant startup ecosystem.
Also read: Digital public infrastructure: A dubious way to foster competition
DPI is already reshaping the marketplace by creating a level playing field for startups, small businesses and entrepreneurs. The case of Namma Yatri exemplifies how DPI empowers smaller players to innovate and disrupt traditional markets, delivering more choice and lower prices to consumers.
It shows how government-led innovation can create a lasting impact, empowering businesses and individuals while building a resilient and competitive economy.
The authors are, respectively, an adjunct professor of data and digital economy and head, Digital India Foundation and policy manager, Digital India Foundation.
