The recent report released by the Ministry of Finance, ‘Indian Economy – A Review’, lauded India’s digital transformation, highlighting the success of Digital Public Infrastructure (DPI) and its important role in delivering citizen-centric services.

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The report noted that as the pandemic disrupted economic activities, the government responded quickly by leveraging the power of digital public infrastructure, popularly known as the India stack. This digital backbone facilitates online, paperless and cashless access to a variety of public and private services, transforming transactions that were once considered time-consuming and contact-intensive.

Composed of three interrelated layers: Identity Layer (Aadhaar), Payment Layer (Unified Payments Interface, Aadhaar Payment Bridge, Aadhaar Powered Payment Services) and Data Layer (Account Aggregator), India Stack reshapes the services industry .

Indian Stack Impact

An identity layer with Aadhaar at its core provides digital identity to the vast majority of Indians, significantly promoting financial inclusion. “Before Aadhaar, only one in two citizens had any form of formal identification and only one in four had a bank account,” the report said.

The payments layer, including UPI, has witnessed a surge in cashless transactions, growing from Rs 70 million in FY17 to an impressive Rs 143.4 million in FY24 (April 2023 to December 2023). Similarly, the data layer has transformed the Know Your Customer (KYC) process, reducing the e-KYC cost from Rs 1,000 to Rs 5.

Pradhan Mantri Jan Dhan Yojana (PMJDY) leveraged India Stack to facilitate direct benefit transfers, taking the number of accounts to Rs 51.5 crore by January 10, 2024. Over Rs 3,360 crore (December 2023) has been transferred under the Direct Benefit Transfer (DBT) model, resulting in savings of Rs 2.7 billion to the government by eliminating duplication of beneficiaries and plugging loopholes.

Epidemics and e-commerce

Furthermore, the report noted that India’s digital infrastructure played a vital role during the epidemic, with applications such as Aarogya Setu and CoWin helping to track and contain the virus. The PM eVIDYA initiative leverages digital technologies to address learning gaps during the pandemic, showcasing the adaptability of India’s digital ecosystem in times of crisis.

At the same time, it was also emphasized that the value of India’s e-commerce industry is expected to grow to US$163 billion by 2026, with online sales accounting for more than 25% of the country’s major non-grocery retail categories. India’s e-commerce industry is driven by the country’s growing urbanization, middle-class influence, and widespread use of smartphones and internet access.

India’s digital success has earned global recognition, the report said. The International Monetary Fund’s working paper on India’s digital journey points out the benefits of India’s digital journey, while ACI Worldwide sees India as a global leader in real-time payment transactions.

It also noted that India’s rapidly growing population, best-in-class DPI and proactive regulation have supported the growth of the fintech industry. India is the third largest developing fintech economy in the world, after the United States and the United Kingdom.